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41110 Translation Bureau No 6828 MrPl r P Annex 1731 G January REMARKS ON AUSaRIAN PAPER CURRENCY Present Austria is a country of 6i million inhabitalits in which industrial activity and commercial and financial transactions make it necessary to employ a working capital which must be in proportion to the rates of exchange and the national standard of civilisation The henvy taxes levied for a year on current accounts in lo aks have reduced the size of transfer accounts end of paymtnts by cheque The instruments of payment in circulation in the country uust therefore have a value in gold or in coods sufficient to meet business requirements If the present value of the available national currency is inadequate the result is a serious shortage of money involving the restriotion of credit en extraordinary rise in the rata of interest short dated loanii at exorbitant interest up to 3 and the circulation of foreign currency used directly for the settlement of transactions even within the country This state of affairs has been prevalent in Austria for about two years and the danger has been realised although owing to a number or circumstances the insufficient natimul currency has beun in such reyil circulation that the difficulties of the market have been slirhtly reduced The boycott of the crown which was too uncertain a currency and constantly depreciated to value asumed such proportions in 1922 that with a working capital in Austrian currency ten times less in value than in 1919 the country could stAl carry on its exchange Each note circulated faster since nobody wished to sec it depreciate while in his possession A glance at the following table will nevertheless show the decrease in the actual value of currency in spite of the alarming increase in the amount epparently in circulation 3 Annex 1731 C Since the stabilisation of the crown paper currency has thus been almost tripled although this inflation has had no effect on the exchange has slightly improved which The value of the currency available in August 64 cold enillions had become alarmingly inadequate owing to the rapid fall of t crown Speculation hnd panic at the collapse of the currency had hastened the fall and these pyechological reasons much exceeded the economic reasons based en the inadequacy of the amount available The result was an under estimate which could be made good only if confidence 4 11 were restored that is if the pyschological ORIMCIS of depreciation disappeared The crcwn should then rise until the value of the notes issued eithout any alteration in number reached the sum in gold required for business purposes On the other hand if the crown were stabilised new means of exchange would most certainly have to be created so that the total value corresponded to the transactions effected the market would then have at its disposal a margin for issue the IL its of which would only be the value of the available currency Owing however to the return of confidence the rapidity of circulation decreased crowns were twain saved the total neueber of deposits in credit institutions increased from 11 milliards at the end of September to 36 in October 60 at the end of November This accumu added to the far larger amount finally saved by individuals themselves decreased the currency in circulation by a corresponding aecunt and its value necessarily increased The State supplied the crowns which the market was capable of absorbipi and continued this inflation until November 18 that is it paid its expenses by means of new notes received from the Bank of Issue in return for the deposit of Treasury Bonds These bonds however had no value as security for the notes in circulation and there tray thus a risk that confidence in them would be reduced Annex 1731 C On November the Austrian Government ceased to offer new Treasury Bonds to the Bank Of Issues at the time of this cessation of State inflation 3 161 Milliards were in circulation representing 221 mil iona in gold at the rate of For money to be as plentiful as it was in 1919 this gold value should have amounted to a milliard either by increasing the unit value that is the exchange or by increasing the number of notes a 3 161 milliards at 3 161 represent 1000 millions in gold b IT V fT Owing however to the difficult economic position of the country an improvement even as smell as that indicated under a would have the most terrible remits such as the stoppage of exports bankruptcies unemployment etc horeover in vie7 of the s it would obviously be exageruted to reconstitute a stock of currency to the va lue of one milliard in Fold half of this sum would no doubt be sufficient to meet the requirements of the country although such a circulation less than 80 gold crowns per capita is considerably less than that of most countries which can be compared with Austria The financial position of the Austrian market now offers in itself possibilities of such stabilisation In 1919 when the Fold value of national currency in circulation was approximately one milliard the available liquid working capital of the country ineauded in add itian tb these crowns a certain number of foreign instruments Of pa ii tent iised for certain special transactions t From tb t time onwardiOertaleCiOods even within Austria were paid for with foreigrr assets fooal raw materials etc s In order to make this clear let us suppose that the liquid stock of instruments of payment at the disposal of the Austrians then included crowns to the p old value of one milliard and foreign currency or Credits in banks outside Austria to the value of 500 millions in gold R e5 Annex 1731 Oe The depreciation ef the exohare in 1920 and 1921 induced the Austrians more and more to safeguard the value of their capital by converting it into stable currencies in spite of the loss involved This demand for foreign securities increased the deficit of the baiance of accounts and accelerated the fall of the crown 2art of the liquid working capital in crams eis thus exchanged for liquid working cepital in foreign currencies instead of retaining in their coffers crowns which were daily depreciating business men kept their reserves in foreign currencies and did not convert them into crowns until they were actually required for the payment of salaries or the purchase of products in Austrda On the other hand manyeAustrians endeavoured to cede theta real property or their hares in the country to foreigners Invested capital vas thus converted into liquid capital realised in foreign money and deposited outside the country in banking accounts especially in Switzerland It is probable that in 1920 when the crowns in circulation were worth only 400 millions the foreign reserve exceeded 1 milliard In 1921 ellen the old value of the currency fell be 300 millions that of the foreign currency in circulation was probably equal in value and the foreign deposits had further increased in spite pf the deficit ef the balance of accounts In August 1922 the foreirn reserve was probably more than milliards It is this reserve which as confidence is restored is gradually being reconverted into national currency The repartition of capital is being effected all the more rapidly as the rate of interest for crowns increases The supply of foreign instruments of payment on the market is 2 3 greater than the demand especially since owing to the rise in priees and the restriction Of credit there is a deortage of crowns indus trial world is endeavouring to find available capital again by selling its reserves the S F 6 Annex 1731 C In such a state of affairs the crown would rise rapidly if tae Devisenzentrale left buyers and sellers to dial with one another It accepts all offers however and collects the surplus for deposit in the Bank of Issue in return for mare crowns issued on the security of such foreign currencies The increase in paper currency has thus continued but with definite security for eaet Issue instead of the undefined guarantee of State stock or private fina ioial bills It is therefore more a case of the conversion of foreign curency in circulatiOn into national currency than of inflation The crowns issued on real security are not distinguished from the others today each is guaranteed by a gold value much hinter than that by which was covered when the circulation was 3000 milliards instead of 4000 CONC U 610W If therefore we wish to sumarise the position of Austrian turrency we may say Since November 18 State inflation has stopped been issued on the security of Treasury Bonds not one crown has koreever the total amount of this doubtful security in the assets of the Bank has been reduced from 2 562 milliards to 2 559 Irflation in the form of pri7ate credit has ceased the total arount of commercial bills has fallen from 865 to 672 milliards The total increase L liabilities due to the rise in circulation from 3000 to 4000 milliards is ccruner balanced on the assets side by 1 1e receIpt of foreign currency which provides real security for the circulation The ahole of this foreign currency credit has yet been granted comes from Austria since 40 foreign It represents a partial realisation of the foreign rer erres accunulated by the Austrians and hich they are aFain converti 1g Into national currency as their confidence increases The crowns In circuiatin are thus regaining a quantitative value which corl esponds to market rewlirements they have not yet reached this Value altDowt the rate of interest is definitely beginning to fall On the other hand the foreign reserves in the hands of the public are being placed at the disposal of the Bank they thus replenish its F Arire 1731 C funds give security for notes in circulation and allow of stabilisation TLIese reserves accurulated during three years of the flight of capital are still considrable They have nevertheless fallen in one month by more than 3 million pounds sterling Which have served as security for the issue of 1000 milliards the intrinsic value of each crown has thus improve4 since today there are 4 rillIon pormds as cover for 4000 milliards instead of 1 as cover for 30000 Such procedure can but be favourable and i11 continue provided corfftdcnce still ex sts The issue took palace partly at the demand of the public which voluntarily exchanged the value of about pou ds for crowns and pertly at the demand of the 0o vernmnt which transferred to the Bank pounds received by it from its foreign currency loan to the Banks It could not sell this foreign currency on the market since the supply vas already too great A secured issue was the only means of obtailiing c ownz by this means The same will prol ably apply to the first foreign credits received On the other hand as the normal balance of accounte of new Austria showed a deficit of about 500 million geld crovas per annum it is to be e y pected that the country will require fereism currency during the period of economic reconstitution after the presrint exteLsive repatriation of capital The Bark of Issue will then have to supply such currency from its reserves and will thus receive crowns in return balance will be ensured by the indispensable foreiEn leans It is probable that by a careful policy the Batik will Succeed in accumulating a stock of foreign currency while leaving a sufficient amount on the market to obtain the pro6ressive rise in the value of the gold oro n to If 6 000 milliard crowns were then in circulation monetary reform could be excA m41 Fetit Vor could be effected at that rate and the 6 000 milliai ds 600 million new crowns representing approxirately the by the market Signed value Pierre Q UrSNAY requiaed This article is protected by copyright and has been removed The citation for the original is Germany Mistress of Europe The Times London January TICISM OF MASH PLAN AND ADDITIONAL PROPOSALS Jan 4 l92 The English project is insoired by the most honorsble intentions but it has not succeeded in solving in en equitsble manner the grave problem of repertions In that pert of it which I shall name institutional it creates two new institutions which seem to be nate foreiTn to the matter of rennretions The Impartial Tribunal constitutel on the one hnnd of representstivea of the interested parties and a third arbitrator named by the President of the United States if the two representstives above named oan not agree iu an orgenisation which suporimposes itself upon the Treety and alstrisutes to itself functions which the Treaty has confided to the Reparation Commission To judge the lerman capacity for payment is the eseentinl task of the Reparation 3ommiseion a task which is strictly sot forth by Arts 234 of the Treaty of Versailles of the dispositions constitutin This Article contains one the basis for the urestion of the Peperetion Commission It does not consist of a modif Annex IT such as wee done when the Committee of Ousrnntecs was crested Co imissinn This Comlittee is but an orgenisetion of the Reparation It is named b its actions to it that Commission end is reessnsiele for It has been possible to modify Annex II becsuse the Committee of Gusrentees entered into the Renerel idea of the Treaty The Tmnartial Tribunal on the contrary is outside of and over and above the Repsretion Commission delicate end important functions It replaces it in its most conseo uently it radicelly modifies the Treaty The ssme consideretions are to be m de regsrding the inancial Council of Control to be created at Berlin with the participation of neutrals and under the presidency of the Germen Finance Linister According to the English project this Council is absolutely indepen ent of the Reparation Commission It is then another institution imposing itself upon the Treaty and modifying Part VIII of the Treaty It seems to me that according to the English project these new organisations would co exist with the Reparation Commission and the Committee of Guarantees economies in expenses Certainly by thie yet one does not attain On the contrary cne would surely bring about a confusion in the attrieutions of the different organisJtions en3 a situation capable of producing conflicts at each instance But U le Premier Poincare has already made very Treat detailed criticisms of these new institutions which would be created by the English project Tt does not teem to me than that I should linger any longer on this argument Mr Poincare has denounced a whole series of modifications which the English project would brine to the Treaty but he hes omitted one which has a very great importance for Italy Articles 232 and 233 of the Treaty of Versailles establish fundamental principles of the reparation system that is to say the principle of the German solidarity for reparations dee also by the other Ex enemy Governments The Schedule of Payments of London wee founded on thie principle The cold marks constitute a reparation for demeees produced by all the Ex enemy Governments It is the duty of lermany to pay for all except such deductions from the total cum of reparations as would bo paid b the other Exenemy Governmeats But the Enc15sh project annuls the totel debt end fixes the amount for reparations representing only the German debt ecutes the payment only for her own account lermany thus ex If Austria Hungary and Bulgaria would refuse to satisfy their obligetions or if they were not accomplished by Lhemselves Germany would not be held to substitute herself for her Ex Allies in their respective obligations at least that would seem to he the deduction to be made from the English project One would destroy in this way the most imoortent legal edifice of Pert VIII of the Treaty of Peace that is to say the essential principle of justice according to which all those w eo have produced damages in common are to be obliged to repair jointly L It goes without saying that this modification to the Treaty pre udices especially the interests of Italy which according to the Spa greement should receive 25 of the payments due by the Ex enemy overnments other than Germany if Italy could not address herself 1 y only for two or three years the English pro Sect accords it for four years and on conditions muctt more generous than those which Germany asked In effect the German Government would recognise the obliga tions of deliveries in kind for the devPstated territories while the English project limits these deliveries to very limited quantities of coke for France and coal for Italy After the declarations of Mr Boner Law it is to be hoped that the English Delen f tion will recognise the ri 7ht of Italy to receive the coLl which is indispenseble for her needs It would not be just in fact that while the Conference made all the efforts for the systemiestion of the vermin Budget wne would end up by aggravating in a very grave manner the Italian Budget which is in a delicate situation This injury to the Italian Budget would surely come about if Italy should oe oblized to buy Pounds Sterling and Dollars necessary for the pnrch2se in foreipT countries of coal which is indispensble to her Fart II For that which refers to the partil annulation of the interallied debts I should first think the 7nglish Government for having accepted the proposition lade by M Mussolini to settle with the Gevlan reparations this very important problem which weighs so heavily upon the general credit of Europe But what are the means by which the English project ostEblishes this settlement At London the intentions of Nr Bonar Law would seem very much broader Today the English project sets as the first condition the transfer to England of the Italian gold deposited in the Bank of En71rnd I must in this respect mare a reserve In the Enplish project it is affirmed that this gold was deposited to guarantee the war loan This is perhaps but the effect of a misunderstandimr be cause this gold was deposited in the Bank of England uniquely for the purpose of covering surplus circulation c f used by this loan A great part of the gold thus deposited did not belon 7 to the Italian Treasury but to private individuals If the ownership of this gold were trans ferred to England by that Lot Italy would sustain a Tory serious dama To because the Itrlian government would find itself oblirr ed to immediat ly buy one half billion of gold to return to private individual lenders The English project asks moreover that Italy cede to England 1 1 2 billion of Series 1 Bonds that Italy would receive from Germany accordin7 to the new sche ule of payments This would siTnify almost entire cancellation of the reparations moich Italy might receive from Germany according to the English project In effect if the Series 1 onds should be reduced to an average of 25 billions by advance pay ments such as the English project provides and if only BO of this sum is destined to reparations the other 20 L being destined to the expenses of the Armies of Occupation and of Control etc the share of be 105 which Italy would receive upon the net amount of erman repara tions thus reduced would be about equal to the amount that England Lsks Italy to cede to her 1 The Italinn public opinion which now follows with attention these problems might in this resnect make a very bitter feflectton Italy wonid receive on the 132 billions which Germany owes for reparations 10 for one pert and 25 for the other part tor share would thus figure between 16 and 17 billion gold marks but the English project proposes to reduce this Itrlian credit to a little more than 2 billions that is to say it deTlknds that Italy cancel her debt to w5rds lermany contenting herself with 115 II the other hand England gold which has towards Italy a credit of about 13 billionhaxicaltincFlftxxxmmxt lire would be dienosed to cancel it against payment of 2 billion 350 thousand gold lire which is equal to 205 of her credit Thus Italy would be more generous vis a vis her ex enemy than England would be vis a vis her Ally Another reflection equally bitter grows out of the fact that while lermany would find herself thus entirely liberyted from her debt vis avis rtrly the latter would not find herself liber ted from her debt vis a vis the Allied and Associated Powers beceuse she would not be relieved of her debt to the United States of America that there are the Series 2 Bonds There is the question It is true But will these bonds be issued To the extent that they are issued those 2eries 2 Bonds would be destined for the United Stites but the question comes up whether America would accent such a means of payment On the contraray according to the declarations of the 7ashineton Government the United States does not accept payments made by means of repartion credits Would it then be reasonable to establish between us a system of payment for America which she would not accept But the English project further demende another condition for the ncrti 1 ccncellation of debts i e the Allies aca oe4 to accept the English propositions wherein they referred to the settlenent of renarations due by Austria Hungary and Bulgaria tion contrary to the Treaty There is another proposi When it shell become necessary to fix indemnities due by Austria d nd Hunary and to concede special facilities to Bulgaria the Reparation Commission will act as Tribunal AlmOI The capacity to pay of each of these st tes will be eut ibli7 hed by each delegate upon the Reparation Commission as a judge of this Tribunal but it is impossible that these Judges should bind themselves in advance to support a proposition which one of them will make and which is unknown to them would the Governments permit it to be imposed and their Judges oblied to accept a point of view of one of them which the Governments themselves did not know The answer is doubtful For the reasons sot forth rbove the Italian Delegation cannot accost in principle the lnglish project even in recognising that in its rigorous technical structure it cent ins very interesting det ils as regards the settlement of the ronletion problem But before 7ou you find another project perhaps more modest and certainly less detailed that is to say the one which has been presented already at the London Conference by M Liusiolini and which I be you to trace into consideration not only for its nationality but boonueo it seems to me to offer the greatest probabilities for re uniting ell the opinions This project first proposes the redu Aion of the German debt to EO billion gold marks except for other refluctions in crse of edvence payments and this resulting 11 lire to be hereafter accepted either by the English project or by the French project it being understood thLt the methods of acc ptation are a little different It proposes to you moreover the compensation of Inter Allied debts with r part of the repev tions due from Germany This ilea has elreedy made great progress end the Enejish project as well as the French project have welcomed it The conditions of this settlement which would make a great step towards the economic peace of Europe are not yet a rreed to but I can not permit myself to come to such a point of pessimism as would keep me from thinking aea that a profound and patient examination 4a f 4 he greater spirit of conciliation on the part of England might not bring the interested parties together The Italian project consents to a moratorium but it demands 4 that the German Government contract an interior loan to which the German Government itself would declare itself disposed It seems to me that that would be the way to conciliate the different points on the question of guarantees which presents itself as the most difficult to obtain general consent The Honourable Boner Law observed that the idea of a moratorium does not accord with the other idea of productive guarantees which have for effect the reJuction of the economic resources of Germany He added that the guarantees hinder the operation of a loan but the Italian Delegation are of the opinion on the contrary that if the loan shall take place and there is reason to believe that success will be easy being given the bac cing up of the German industrials already disposed to share its success the guarantees mitht not be put into operation because Germany would be in a condition to execute the tayments established for the Period of the moratorium In this cLee the guarantees might perhaps serve to render the loan itself more easy I be you then after Yving finished this ample discussion which will hEve served to develope the general ideas and principal conceptions on which each Delegation bases the solution of the reparations proolem to take into considert tion a project which present itself as the best average of the ideas expressed and which perhaps will have the virtue of conciliating the different tendencies ed which manifest themselves during the course of this conference tract from Le Temps Friday January ENGLAND AND Tin DEPOSIT OF FRENCH GOLD A note from the 71inister of Foreign Affairs The Prime rinister communicates the following note Following t r e declarations made by Mr Sonar Law on the subject of the gold remitted by the Bank of France during the war in execution of the Agreement of August and reproduced by the Press the French Government believes that it should bring out the following points I The Agreement sined at Calais Alienist between LL Briand Ribol Asquith and MacKenna would put at the disposition of France credits in sterling for the amount of 150 million pounds Article II las drawn up as follows The French Government in exchange for the advance of 150 million pounds stipulated in Article I agrees to ask the Bank of France to put at the disposition of the British Treasury a sum of 50 million pounds in available gold constituting an ndvance loan to be returned by the British Government three years after the termination of the war The reimbursement of the advance provided for in Article I will ta ke place at the same time The placing at the disposition of the British Government of this sum would not exclude that Government from the obligation cf returning the gold according to the above conditions Upon several occasions the English Government manifested its desire to be freed from this obligation Iii 1917 the 13th March it demanded from I Ribot to accept in a draft of a new Agreement the following article It is understood that the reimbursement of the gold loaned by the French Government to the British Government according to the terms of Article II above and in virtue of Article II of the LITeement of Calais in the month of August 1916 can be used as a balance towards the debt due by the French Government concerning the treasury bonds of the French Government discounted in virtue of these Agreements M Ribe refused In 1919 a new article was inserted in a draft agreement at the time of the voyage of M Loucheur to London The French Government was to engage itself to not deAand the reimbursement of the gold held in execution of the Agreement of Calais until the time upon which the total of the French debt vis a vis the English Government would be liquidated M Loucheur reserved his adherence and upon his return to Paris the Governmeni refused to accept the article The Agreement of 1916 therefore remained the only one which fixed the legal situation of the gold deposits in the British Treasury and conforming to the stipulations the amount o2 this gold continued to figure in the balances of the Bank of Prance To the aoove note we add the following information The deposits of French old which have been made at London result from the two Conventions the one of Feb 1916 the other of The Convention of Feb 1916 constituted an operation of Aumst 1916 a strictly commercial character between the Bank of France and the The Bank of England having discounted the French Bank of England treasury bonds of which the total amount was first 60 million nounds and raised later to 72 million pounds to return finally to 66 million pounds the Bank of France deposited at the Bank of England a quantity of gold equivalent to 1 3 of the sum thus advanced odelt ite two due Upon the first a t to 6ww stipulated for reimbursement the Bank of France c made in 1922 two payments which permitted it to bring beak a quantity of gold equivalent to 3 1 3 million pounds sterling It does not seem that the Bank of England was desirous in the future of having the reimburserients succeed each other as quickly as had been provided for As to the Convention of August 1916 it provided for an advance of 150 million pounds that the British Government would make to the French Government This was not a commercial operation but en operation be tween Governments 3 The Bank of Trance was to furnish in virtue of Article II of the Convention a quantity of gold oquivalent to 50 million pounds sterling and this gold was minx to ho deposited at London Article MI of the Convention stipulatod that the gold would be returned three years after the end of the war sumo time The loan would be reimbursed at the Those are the 50 million gold pounds thct tho Bank of England would like to appropriato now AP 1 ritish 1 ote on the erench ote of 3rd January 1 ae first criticism advnced by the 12renoh Government is that the 3i itish Iroposa is a direct infringe ent of the reaty of l eace onF as of thoc e documents known te International law erpetual treaties une which cannot be modified It may be said at once and ithout hesitation tt t on the voints on which it is thus attacked nothing is proposed in the ritish plan which is riot ithin the contemplation of the reaty ane for which indeed rrovided in the treaty itself equate m chinery is The britieh plan does not nro ose to make any new contract with iermany but to avail ourselves of the provisions of the existing documents lollewing the precedents rich h ve already been set in the administration and application of the Treaty clauses The meaty indeed though it no doubt may roperly be called perpetual has with wisdom and foresight been expressly drafted in such a way as to allow for the modifloations wiloh changing circumstances and conditions may show to be necessary The British pro osals vw ich re alleged to contravene the Treaty fall under t o hoa s reduction of the 60hedule of aymente zfirst they rovide for debt as already fixed under the next they intrmuce certain modifi cations in constitution o f the eel ration Commiseion Wes a matter for the Allied and Associated Governments see erticle 40 of the Treaty and was embodied in annex 1I to art 1 1II annex contained a special Clouse LL to the effect that it might be amended by the unanimous decision of the Governments rpresented from time to time on the Commission Consider ble use has lroady been made of this Bower of amending the reaty which vas thus made exressly subject to modification Thus a Committee of Guarantees was con stituted in lay 19e1 by the chedule of kayments to ehich as assigner specifically the poeer to examine the German fiscal system under paragraph 1L of Annex II and to secure the application of rticle a48 This Committee was from the outset ampoeered to co opt members of neutral nationality Thus one of the eowers the removal of which from the eeperation Comedeeion is made one ground of complaint against the 3ritish proposal has already been taken away from that body further the Zronch Government has agreed eith the eritieh to introduce an amendment to 41nex II by which in certain events the power of interproting kart VIII of the Treaty without appeal and with binding effect on all parties including Germany perhaps the most important of all he powers of the Commission may be devolved upon an arbitrator nominated by the Council of the League of Eatione egain the power of modifying annex II has been used by the Allied Governments to introduce a provision paragraph 19 bis compelling the German Government to r eke Bert in deliveries in kind the value of whit al is to be fixed in case of diseute not by the Commission itself as is the case with all other deliveries in kind contempleted by the reaty but by a referee end 3a nd yet these amendments to the 2reaty made as they ere in pursuance of ewers which the Treaty itself contained Oo not seam in the past to have oeen held to require a reference to the iroLch une 4One other point when an infringement of the rent alleged should perhaps be noticed is onsieur 2oincarels statement complains that the 4ritish plan contravenes com pletely the provislohs of the peace treaty as to reparation in kind because it negleots the figures given in 11 nexes Ili IV and V to kart ation to give VIII of the Ireaty and aluo eraany s oblig riority to deliveries of coal intended to replace coal from destroyed mines to be some misapprehension There would u1 pear here nnex III of the reaty relating to ships has now been exhausted ith the possible exception of certain small details as to river chipping and GOG orders for ship building 4nnex IV sueplies for resto ration of devastated areas has already been extended beyond its normal life 2 nnex V relates to coal Under both these two latter Lnnexes the deliveries are not of any precise quantities fixed in the Treaty but are subject to the decision of the Eeparations Uommiesion which has to take into account Germany s domestic and iildustrial reeuirements There can therefore be no ciueetion of violating any 1 rovision of the Treaty seeing that the amount are to be fixed from ti e to time in such a manner as to be coweatible with tic capacity of Germany Lastly before passing away from these juridical questione it r ay be remerke that the scheme proposed by the French overnment itself contemplates diving powers to the vommittee of Guarantees including as already remarked neutral members which n far beyend anything included in the Treaty and comi rise the 4a S the right to disallow expenditure f roposed in the per an budget and to prescribe the increase of Germi n taxus power co olde is not at first sight reconcilable with the express eta ement in the reply of the Allied and asociated lowers already referred to that the ommission does not cossess pow ors to prescribe or enforce taxes chracter of the Berman budget c to uictate its introduetion may no doubt be defended as a mo sure of compulsion to be used in the last resort but it involves going beyond the provisions of the Treaty I 5II Fixing of German i ebt be obtained from Germane coeeistently with the restoration of her finance and credit the total burden on Germany for all xlmum must include the uroses and remove any element of doubt es to her total maximum liability It may be added that the annual chttrgo fixed by the 3chodule of Payments iteelf covered riot only the reparation debt proper but also the reimbursement of the Belgian debt uhich is the main other cherEe ehile the modified schedule of payments for 1922 fixed by the Reparetion Commienlon covered also the cherges for the exudes of ocovration The couree proposed by the British plhn is not only essential to a satisfactory scheme but has alrea4 been accepted as failing under the Treaty and acted upon Reparations in and V If it is admitted that a moratorium in necessary ith the object of balancing the Gerrun bud jet end reetoring lerman credit it follows that deliveries in kind which require payment from the German budget to erman nationals must be included in the maximum German burden 7o demand excessive deliveries in kind must destroy the object of the plan The French proposal world appear to involve deliveries in kind which together Ilith the other treaty charges would mean an effective payment by ermeny in excess of the eetuel payments which she han been able to melee in 192e In infinitely worse finenciel circumstanees Germany cnld have to pay more in 1923 than the sums which have already mede the grant of a moratorium necessary The British plan does not suiegest that treaty obligations to maee deliveries in coal eyestuffe timber 0 timber etc should cease it does ropose that for the reasons given above such deliveries should be paid for in cash by tt o receiving powers in so far au they may exceed Thee maxima would be the new annual maximum to be agreed fixed by agreement among the allied ane not by ne otiation with Germany if the allies are unable to reach agreement on the possible amount of 4 ree deliveries the aritish Government would be quite reaey to tofer to the committee of banks the uuestion of what amount of eAch deliveries could be made without diminiphing the possibility of aUCCOSSful loans by feraany The criticism that these deliveries will be pale for at double their value is unfounded iermany will is credited with the value of ny free deliveries in accordance with the prices fixed under the treaty or by the eparatien OemmicAden but the value so fixed is the equivalent el ce eh and must be treated as cash for the purpose of redeeming bonds The bones themselves are subsequently treated by the lirenct Government in their criticism as only being worth 50 43 of face value but here they are apparently taken as eorth their full nominal value The argument is clearly fallacious laingth of the Loratorium VI Lilo the aritish pmposal contemplates a probable oratorium of four years it specifically j rovidas that if the finance council decides that the condition of German iriance is such that cash payments for reparation can be comLeneed iemany should pay the 9sums Lill tis authority ley prescribe in each of the years 19Lb and 1926 up to an wlsount net exceeding Iwo milliards 301d narks in each year Tlio meraLorium Lauy there fore if circumstances permit be reduced to two years Vii iledges and danetiens Gages It is said that the moratorium is to be granted without any gases or sanctions The British 7overnmnt is prepared to enforce sanctions of the most drastic kind inouding forcible seimre of Lerman revenues end assets and even military occupation of Jerman territory outside the existing zone of occu ation in the event of the foreign finance council reporting at my time that lermany is not taking proper steps to stabilise the mark or reform her bu get and also apart from the financial programme in ease of any default by Ilermemy on the payment due in res eat of the new bonds The sanctions which the i ritish Government contemplate in the event of lemon default are therefore of the most drastic ch racter The British Government are in entire agreement ith the rench proposal thz it subscribers of loans raised by Germany should be entitled to ask for such s ecific secilrity for their loans that they may think necessary The ol4ection el the British government to the demand for pledges by the allied Governments in the meantime rests on the conviction that gaol a denand is inconsistent vdth the restoration of German credit if this 2roposition is not agreed to they tould be prepared to refer to the Jommittee of Bankers as representing the 2robable opinion of potential lenders the i uestion of what pledges if any could now be taken consistently with the germ ral object of restoring Ger an fin nee jhe Tho E tatement that GermA ny the 1 oriod of the moratorium have entire liberty vnder the proosale of the British Government in Inaccurate the continuance aid indeed the strengthening of the enpervision over German finEnces le an intesral pert of the British plan Total Liability for eeparations VIII 1 is alleged that the total credit for reparations excluding other leace Treaty charges would be reduced to 20 milliards of gold marks This makes two ieeossible and inconsistent assum tione first that in the year 1923 hiring ehich the French Government agree that a moratorium is neoessary Germany will be able to raise in the merket the colossal sum of 1 250 millions eterling and secondly that in this event the and series would not be issued But it is clearly impossible for Germany to raise a loan of this magnitude and the Geman burden will therefore be larger lt oreover in considerlag the burden upon Ger an finance regard must be had not only to that portion of the bonds which can be identified with reparations payments proper but to the totel of ill charges under the Treaty On this basis what are tle real figures On the B e table the present valee of BO milliards of gold marks let series bonds after alloeing for deferment of interest is 39A milliards and of the l7 second series bonds commencing in 1933 about l0 50 milliaree milliards a total of On any probable hypothesis as to th rrogress of redemetion the eresent value may be taken as about 34 millierd gold marks for the first series bonds end about 8 milliards for the second series bonds total 4L milliards These figures will be found to coincide closely with the astir ates 11a esti ates of the real vaue of Gorman obligations under the chedule of iayments given b 4 the zW pporteur of the Budget Committee of the humper of J e1 tics in July last It will be found that they represent a middle figure between the highest a 1 lowest figures which he dives as the value of erman obligations Bonds To treat the existing 0 Bonds ao having real value is notoriously contrary to feats the ilapporteur of tLe Budget Cormiiittee of the Chamber of Adt uties worting on hypotheses which he himself describi c as very optimistic estimated the present value of 70 milliardsof C eras at between 7 3 milliards and l miliiaras and decided in order to be on the safe side to take an intemediate figure of 10 milliards 4 The U eonds can 12 can only be regarded as a bad dent off ambit 06 eritten he writing off of k bonds is is pbsed by the realities of the situation Until this is done 4erlean oredit cannot be established and the value of A and B Bonds suffere accordingly Pain what are bhe facts The proposal of the British Government is to exact from lermany the maximum Which it is thought she on pay It is useless to complain if larger UMW OZ4 1110t be obtained the figure of 6 milliards of gold marks for the 2rench and British share in the Belgian war debt cannot be identified The best estimate at the disposal of the British overnment gives the figure of 4 8 milliard golO marks The stateent that the charge against the first series of Bonds in respect of the Belgian ear seet is a nev reduction in the money available for reparations is inaccurate as in fact the Belgian ear debt was represented by a certain proportion of the former A and B Bones under the schedule of iayments The loss arising from the deferment of interest on eeries I bonds is made good oy the issue of series ll bonds There is a possibility that Germany will satisfy the proposed arbitral tribunal that she cannot in 1933 bear the additional burden of these bonds but elsewhere in their criticisms the xrench eovernment assume thet C rermeny may b able to raise t1 50 million sterling in 1 k 3 of tho first series in eeemoer 194 if at that time she could oxoect to rAiso in the market the Valossisle already vinted fi rALI0 of 21 250 aillions storlin uut out if this assumption ere correct the series 2 bonds would have u value f r exoeedin 2 milliards On any robable assusotion the amount to be ki id by Ieribialy salad be oonsIder ably lar er see ara raph VIII above these explained the resent value of the first series bonds on a 5 4 table is 391 milliards or on the most san6uine assura tion which can reasonably be rude of the lossibiAities of redaaption 34 milliards 80 of this latter fi tire v ould Lo 27 milliards ace ooraared with 20 milliards tad in the drench statement L he followins table ives the division of this fi ure oo n9ared with the Preach fi ures rendi fi urea 80A of 25 milliards 13rItish fi urea b 60 of a 1302 of 34 milliards k r nce rent ri tain r its Milliard Liilliard old marks Dail Tara old marks 14 old Italy um Others 15 he statersont therefore that the 20 milliards distri Suted as above represent the tou 1 14 Inent s avai 1 1ble for rege ations for ell ti allies out of the first series bonds and that the share of Franco would oe limited to about 11 sitliiarde cen of ue taco tad In dealin with the 1 milliards carried to reserve fund the t rench overielent a An ado the the optimistic hypothesis that the erman overnsent could ue able to redeem these bonds by the 31st eocemeer next and put their imient value therefore at 5 milliards On the oezer hand they take the value of the iel lan war deet o alreedy stated this the i ure of C aiiiiards ii ure does not correspond with those in the osoession of the iritish overnssnt ano the full noninal value of this dent would wear to 00 4 0 milliards pit the Jeers holdire these trends must of course under the aim iloceet their redemetion in accordzesce is the scheLeilo if therefore the Jorman overwrent is in a losIt ion to redeem the reserve fund ponds by the 31st Llecemuer next the char o in roe eat of e feJian dent 4111 ue ti 4 ailliards snd not nilliards 3o that even on this as um et ion ther would remain a considerable wrount in the reserve fund to eeet the other chares such as armies of occupation eel oleurin 18 not be raised immediately The ffeot on the erlan budget by de erivine her for the time ovine of the revenues intoroe tode would ther fore ee to increase the earden from the above nears of from 17 70 to 80 millions eterlin to somethin in the excess of ail lions torline It ety se recalled that the exeerts sun ono to Berlin in the eatu m erreed in declexine Unit no suostantial eayments in oash or in kind could be exeeoted from Gereettkv in 19 3 consistently with their plans for restorin rerean credit Juseestions therefore that irererany could aurin the moratorium melt e deliveries in kind of 1 millis d sold marks ter arming in ad dition to the tether charges roposed are ontireky inconsistent pith the unenleous o inion of the exeerts and would from the lase any attemet to uLabilize the ea out set render hole or to palancse the erman euti et his oen olearly oe soon from the eieeent eosition of the eernen oudeet leurint the first six months of the aoturel revenue of Cternany was sufficient to neat the total domestic expenditure end leave a mnal1 surelus over towards zie tine sale of the reparation oilarc es ale do reciation of the nark durin the eatumn has erAdo it almost imposeiole to ire any definite fires but the etiolates of tho deficit on the internal exemditure alone without eny roeision for reeer tion durin the car ont fin noiel year is now not less then 400 4i1iiards nd will more erobely 0 ouble fiture t the present value of the A er e trk deliveries to the value of one milliard old marks would ont e 1 disaar et cents Oy the ierraun uvernaent to the extent of roAi I Lely 1 800 milli ards of a er narks the eernan revenae ees not Ito to the resent exceeded 160 milliards in ly inoreaaed Aonth and Lae revenue will ther fore have to tee neat times to cover the roposed deliveries in kind These fieures are aufilcient india ion of the leteosaibility of realisine such a pre reerle if at the saele tine the eemin Jevernment is to its bud et arid to stabilise the emrk required to balance tout he Prenah overnaent e that the ritish plan includes e annulation of tne wur debts of the Ties to rest Britain but it is under an al tiro 1 sai lrehen sion in thinxin that the cancellation of the a bonds is su osted as a condition of t is nnulat ion 2h osnoell tion as has alreai ly oeen A pi aped is simay the g ritin of of a sad doot which ham ors and indeed mattes in oesiole the recovery of the offeotive lout of raany In the st to iv It is noticeaule that the ritishdest to the United tt tes is wAtten do4z1 to 13 5 milliards It is not ale r on Anat basis this ft ure is arrived sat out it appears that this resuit is ost ined by tho 01 n Bonds fish firitf4in offers to acoeA as a small set off for the cancellation of the Into allied deuts owin to her at their full nom n al v e homes as shoe already been renamed the same ponds are Lamm as mrth only 50 of that value for the 9ur oses of calcul tinG the recei tO of he not losition of ire t 3ritain and the iritish roposals in a DOait ion to est17 te nee r opectively under f r as the iritiah lovonaent is at esent be that felt s itlain cult ObtAlt 3ellass bonds to 1 total re ant value on the 5 C table not allowin for rederaotion of 18 4 milliards of pld marks as ool lared ith the jrit sh lest to rierioa of 20 mlillo rds whereas fratICIA 4 li receive eraan bonds to a total ty lue on the same So sib of 41 milliards free of her loot to great 3ritain Ls coislared with the wench clout to Aerie of 14 milliards Ile result is that the 221tod Kin dors will still reiaain indebted to the United t LLes even when it has received the Dail 22unt of the ovule relarAttion lirlents doe to it under the resent fropos ils aereaa FranOe alone iouid still have a subst ntial surllus of receipts fres evraavy even after ayin her debt to ierioa in full 20 he eropos 1 to set off the old deposited in n land under the reorient of 19 16 a ainst the rose ranch debt is in accordance with the ar an elonts tiien nade under rich each old as olaced at the disposal of the iritioh Treasury as a loan to Je re 1 d 7 nen the french debt to the United Kin dom had oeen reoaid It was uoseuently a reed between the two overn ants that it would bo equitz ible that interest on the old which on in 11y had seen a non interest bearin loan da all be aid as soon as the United if in dom he interests was credited to the ranch overnnent hnd this has een done It is ther fore actually eklenced the old oleal ly proper to uffset the v ilue of the old from the iuterallied deft at a time when the iritish tpvernlent is osin to oancel the hole of this dent posal is insoried by the desire to secure myrient from Jornany by Jvin her er to restore her finances In the iew such a otr ose involves an effective ction of the ta 1 dent t o a reasonable onditions are in their view essenti t1 to nd final settle znt in the Amaral interests pose would ue rustrqted oy a policy ut inin a reL tively snail istriediate result of a ooelete collapse of eraan overnent hold that their voposals eroody use the total which they oropose while leav ormany is likely to oonviend itself to the reasonable rid a en roue offer oceans ro 23 in scate of her ova sre at needs and of aer ova li oliities to zserioa re 3t 3ritain has of erect not rely to shzire with her life s in the reumtion of the re lir tion total but In audit ton to cancel her de A 3 to R total of nearly 110 pillion sterlin a sun roiided i y the creation of 5ritish de A the Burden of which the Aritish tax ayer 4111 for at least a encration h 70 to Jeer astuary 4th 122 ezw I hove the nonour to ooseat agein to the merlon of Adofs of overnmenU the dro iuct of a settlewlit of the reparetion due by Germany that tho Italian rips Idolater 1 6 kossolini eubmitted to t1 Oonferenoe which tout plaoe at London aurinL Aloamber lasts he Paris oOnference being but a contirmation of th t of Lonaon the itaidn project was then the objoot of a ffirst study and left in sponse and should be locio aly with too roopening of Lho conference is oxamineci ertain mcuifie Aions And A coif Ilona have oeun mode in file projeot with the ob ect of oomini closer to the different points of view whiuh wero m n1festvd London and after the London confer as in order that it would be easier to attain the oonsent of all the Alias Bafere my departure for ondon vast paraitted to anew tu plum for tie dieoussion of the problems which would form the eurpoao of teat reunion I desired to know if one had enviesaed the particular and transitory asaacts of the reparation aroblom which miaht be occasioned by the renewal more VY less lona of the moratorium to Germany ata h ended Vac end of December or one had envisaged the roparation problem as a wtole to that a arealate and definitive solution could to ulVan it Irnt from the moment that ue reunited at London I think that we should have mode a rociarocal and formal egreetAnt not to ceps rate before havin falfillea oat task which was that cf salving the Repuration problem in its grand lines leavina tc the aeloeates which are to meet at 7aaiseels Cr elsewhere the teak of fixinc the praotioal teems 11 the people of aurope are awaiting with an anxiety which one might term anguishing for the roaults of this meeting and this aaxiety roes from day to day on 4 40courit of the economic crisis which becomes more graiy every After four aeure tame the amittice the amoral situ Um of Zureps day has not malioreted It presents to us two aspecte the miasmic which is always grtve and the political which werks e progress towara thu return to normalcy of social relat ions in the years Ian and hags one has been able to feel for the moment on account of the communistio attam ts at Ba q leet eci aunioba the oocup ition of factories in Italy gait aelend the 3olsheviat offensive and the utroarous riots in Germany that the communistic wave would bete eeriousla me weed that group of legal political and eoonomio insti tutions which form the ease of eaturn civilisation Today the danger roore sentea by this sort of moral epidemic is strongly diminiehou But if we wish to avoid a reeOmmeneement we must get rid of the present economic life in aarope aid of that stAe of incertitude into which we have been plamged for the past foar years n incertitude the effects of which make thessAws felt equally among the industrial classes as well as thu working classes The efforts made by the Powers to avoid the uotrian catastrophe arc before us to arove that it would bo scramming dangerous for every one including the richest tetea on both sides of the Atlantic to await still longer the state of almost economic chaos in which a great part of Central mrope finds itself This 2 at of okoas is the result of the after war aalloy whica is dmainated by the reparation problem It ay on aciactznt of her particularly difficult omaitioas and on saa mat of the vary heavy saorifioee of mon and of wealth that she has made is ostroriely intorastad in this problem The Italian government affirsm to i 4n ith that it wmald be infinitely unjust to reconstitute Germany by motins of the misery and ruin of a rance Italy Belgium and the other 1lies an amount of this one cannot in the examination of reparations ignor the protaem of intor allied debts be opinion of the Italian overnmeat which I have the honor to preset again might be rasateed in the following terms Reject 2 any solution which would be only partial or dilatory The absolute impossibility for the Italian god to renounce im any amount whatsoever the total of its raparations unless mai as equitable arramgement on the part of analani mod her oradite towards the llies permi ta her to ranaunoe in favor of Germany u oroportionate part of reparations The hope of such a settlement is legitimatized by the tradional functioh of equilibrium and modification exercised by angland on the life of tie auropoan Jontinant by the state of the spirit of certain shades of anglith public opinion and also by the BalfOur Note a note that the Italian government and the Italian people have ocnsidered cal welcomed as a way toward a radical solution of the roolem The Italian overnmant asks frankly and loyally this arrangement on the art of England tieing into oonsideration the following ideas a 2he It lian government considers that the Interalliod debts as it has lroady been rumarked are of a nature quite partioular and that one cannot a ma ider them as a on on de bt a The British government and the most eminent Lnglish man of ainanoe and Ammerca realise aerfeotly that analand m at demand the paymeat of its cradita without precipitating the allies into the abyss of a awlitioal crisis and an oconomio failure events which would have an immediate and formidable repercussion throughout aurope inolaaint a aiglinda The Italian hover anent considers that with its arrangement Ingland would alleviate immediately the economic situation of the Allies and of Germany aad at the sane time arrosting on the politics military smut this Ausso Garman alliance which outlines itaelf on the horizon and which can oe presented as an enormous danger not too far away for tact rest of aurope http fraser stlouisfed org aettlement St the Federal Reserve Bank ofof Louis remainder of the German payments by the conoes of three billion old manes 5 Certain revenues of the German Jtate on which the privilege of reparations is today established will to Lken as a guageatee of this loan The separation Commleaton will allow that those vac Brent the loan shall have as a guar Antee a priority on these revenues Article 2es Treaty of Versailles 6 The Povere hying right to reparations may oblige earmeny to continua the deliveries in kind coal dye stuffs etc eenfonsing to tin annexes to Part VIII of the Versailles Treaty wed miler the oendatione and the price indicted in those AROMMI Tbs said deliveries in icing will be payed to Germany fret the share of the loan duo auaually to each one of time receiving Powers 7 During the period of tae no atorium the Aeparation tam mice ion and the Committee of Guarantees in the exorcise of their pomere ruinforoed if necessary will see that the German GoVernment takes all waseery measures in order to stabilise the value of the waft to execute the financial reforms required by the Coneattee of Guersitteent to re establish budgetary equilibrium suppressing not indispensable expenses A peel ally those havinc the character of publics works assuring the greateat possible yield from the tares and stop ling monetary inflation The period of the moratorium having terminated and the credit of German re established she will take up again the payment of the r aerations by means of more important loans that she has agreed at umenit to contract u If Germany shall aoquite herself in advanse of the amount of her obligations the advanoe payment which she shall effect will be applied to the reductions of her capital debt discounted at the rate of hf the enemata are made within a period not expeoaing 10 years do do do 6 do do de do T1 Val x aAANTa4 uoimuurariaG1e n 1 Maintenance of the present control exercised by the Allies on the avorte tion and import6tion licensee it is known that this control should be dressed a wording to inter alliod agreements and replaced by tie aurvoillanoe of a mixed Qs on composed of german and flied representatives Aroct administration by the ALLILL on the outside frontier of the REINhe 2 land Tell administration of this customs line has alresuy been exorcised by the llies in the past Its yield can be estimated at 140 to 180 million gold marks The income in paper marks could as e chaniod into goad marks by the Awe Bureau which would aocori the exportation licenses on oonaition of the remittaneee of a pert of the foreign bills realised by the exporter which would be reimbursed by the said SUPOIal in Gaper mares ontrol of the UndertaXin s which administer the do masa orestgl of 3 Orrnanye 1 control t hxr exercised by the dole ates of the hied overnments or by fL ion enc consv ilantly amid also exit a more extensive fellin6 of trees the re alar and even more Important deliveries of wood to the repeat ions ace oun t Uontrol of the vcduction of the 4 The Oontrol of th for t1 mines of the Jcodl otion of the 4ate mines would servo as a uarmt ee deliveries of coal for t Le re Air tion aaco eat and assure the necessary wintitille for the Aaineland a aihst any Ltempt of the soich the ztvoce tion of an economic crisis in the occupied territories itS101114 erenoh 4ksi The French aroam of first the search of a solution of the reparation Problem and of the Interallied debts second the edoption of a precise policy concerning tile stabilisation of the mark and the re orgenisatien of apeman finances third an immediate deoisian ooncerning the moratorium demanded by eermany and the guarantees of which the French government esteem s the seizure indlepeneible us much to assure that payments be maintained during the course of the nuratorium as to prevent a later default of the Aoiehe liaeiiiieZiae ij Li mi L61M La Zi Germany has demanded 1 a reduction of her reparation debt 2 the fixation of this debt in proportion to her possible budgetary excess This last demand is evidently inadmissible The budgetary exoesees of Germany are in effect the r suit of her policy and of her good will The experience of the past would not give the least confidence in the future The French government recalls to her Anew in a special note the incalculable defaults comeitted by Germany during the last months leave us any illusions ehey are sienificant end cermet The French eovernment declares that it is not disposed to acoept eny reduction of its part of the peements which Germany owest it in virtue of the schedule of eayments This part in effect is from this moment insufficiert to erenme the charges of pensions and tire resteration of the dev stetea regions The reduction of the German debt could not then be envisaged by the French Government unless eertain of the flies would admit the possibility of a reduction or other rearrengement of their erudite on Germany by the modi fication of the peroentage8 and the attribution of a priority of roperation payments to the devastated regions it is not for France to give an opinion regardine the intention of the other creeitors of Germany on this point However an official document of the nglishGovercuriont h2ving Given to understend that that government would be disposed to abanaon or reduce its demands via e viz Germany under oertein conditions toe bine the problem of interallted debts the French government believes it should at to what is in this respeot its point of view It does return to the question of the ori gin and the sienification of tie debts It moans that they have been cm trasted in the inter st of the woven victory that they constitute the execnses 2of the war and oonforming to the orizmiples laid darn by rtioles 231 and 232 of the Treaty of Versailles they should be first charges on the reparation credits The French wove meant cannot in equity or in fact pay eitier tbs ozinit al of these debts or the interest as long as tiny sh 11 not have oecn at least covered by German aymmts of past and future costs for the reconstitution of the devastatad region thee expenses Gorr sponoing sensibly to the French share in the F 1m1 B oblit at ions If oert lin of the oreo itors were disposed to moept this le thoci of settle Lint tin French slovernment mulct bo ready to reeu t to then from this macont on its share of the C obligations a nominal capital equal to the nominal amount of its debt It declares th t it is ready to annul the 0 obligations witch it would eventually receive in payment of its min ort dits if this method of settlement were adopted cry the whole of the au Opean Potters and if those of trop who find tiem selves creditors would decade equally to annul the v obligations which would be remitted to then Conowning the methods of pap nt of the German reparation debt such as they have bek n fixed by the Schedule of Payments or a aoh as thr nicht oe reduced in nab ord nee with the hypothesis above set forth the rim Government is of the opinion that it is in the corm on interests of the llies and of Germany to assure themselves of the payment in a shorter spacie of time that that which has been laid down for the amortissoment of the A and B In consequence the French a overansit awaits that the 1 aynents pated which would affect WM 11y should be until a date to be fixed au anted for them at an equitable rate uch Payments could not be actually effected by Germany in appreciable amounts exempt from the product of foroign loans oantracted by her the French Luvenimont thinks that the Allied governments should by all ITO ns in their power favor th omission of these losses It believes moreover that in th very near future such loans would be pose ible The real soar titles could be found now in Germany for the service of limited loans and the affectation of these sureties to tirise loans could be efficaoiously controlled by tin Committee of Guarantees to which would be added at wording to the dispositions of rtiole 6 of Oa iohedule of Payaents representatives of the subscribers An sa pem ive mobilisation of the German debt amid note however be obtained as low as order 3 n not been re established in German finnoes tinier the oonnitions and under tin oontrol indioated in the following chapter IL jip MGANIZATION ilLI d14 4 The French Goverture i considers that the prOgram of re organisation of the Gernka finances should comprise the following essential articles The elaborAion by the German overt of a plan for tie et bilis tion of the German money to be submitted for the approval of the Ateparation Ooranissioiy o rrying no other intervention on the money market that that which Nit uld oe rieees sary to maintain the exterior vulue of the mark t the rate Cricen at the ueLinning of the o9erat ions until tire interior value of to money should fall to a value in the neighborhood of the exterior value which remains oonetant 20 Immediate treasures to be t icon to brint the German budget into equill brim laid to maint in this equilibrium while introducing progessiTekv in the expainss the necessary credits to permit Germany to acquit herself of her repara tion debt So Cessation of the disoounting of Treasury bonds by the Itelebabank as sows as the plan of stabilisation is put into execution It would movide a means for the emission of interior gold loans fa the newts of the Beioh whioh you d find themselves not covered p COV is ion 117 by normal receipts 4o Reinforcement of the proper dispositions to stop tie nicht of capital and the hoarding of foreign monies in the intorior al Org hisat ion of the control f Cr the applioJt ion of the 4 iA po It ions as stated Above by the ommittee of uarantees under the following conditions a A complete plan of legislative and administrative meosurtJa will be est 11 shed by the German goVernment in aereemead with t be tiop Fes t ion ommi es ion he German Averment will Wee to present this plan immediately to the Delon stag and so far as is neoessary to the Assemblies of the States who should agree to u hold it end not tootheriiise modify it except in agreement vdth the Cormiittee of Guarantees b The Committee of Guarantees will follow the execution of this program and notably be in constant touch with all the uetails of the state of the fineness of the Reich and of the Mates It may use to effect this all the weans of 4 Aistit LItion which it may judge useful It may forbid all ex ones which it may judge inopportune and prescribe all sucmontation of roceip s and destined to permit Gormany to pay reparation charges 4udged by it possible It would exercise on the Hoichebanx and E 11 othr r organisations barged with carrying out the modifioa tions of the German monetary regime the necessary control to assure the execution of the plan of reform which shall have been approved by the aeparation Commission If the program set forth above has not been voted within the delay o fixed by the Med governments if the engagements set forth havo not been taken or h ve not been held to and if the German Govornnent does not conform immediately charged with the control this default uould to the A Lunation s of the or constitute in Itself a voluntary default in the sense of paragraphs 17 and 18 of nhox II to Part VIII of the Treaty of Versailles and all of t o sanctions laid dawn in Chapter II hereafter would enter imoediately and automatioally in foros The llied iJowors would agree beforehond to give instructions in this souse to their delegates to the Aeparotion Commission The final disposition of hrticle 7 of the s Asheduie of eajments acoord d ing to which the jommittee of Caorantees is not authorised to intorfere in the G rmen Aministration will not be consider 1 as au obstacle to the aoplicotion of the dispositions which precede It will be well understood that the stipula tion cited above 6101 flea only that the Committee of guarantees would not substitute for tne Armen Uministrative services and assume the direction of their services trJ Tronsfor of the headquarters of the Onsonittee of Guarantees to 3orlin and the addition to this committee as soon as a foreign loan sholl I ve been emitted of reorosentotives of the subscribing countries tilLUZUEAlliia OWAVILS he French government considers that Germany would be able to maim in 1923 in agreement with the large industrials a augfioient effort to bout the aheoule of 4mehts and that in any core the moratoria cif manned by Gorm nw is not acceptable except on coodition that it doee not effect tie totality of the Paymenta due by Germany and that it is moored by Cue leisure of guarantees 1 xtont and duration of the moratorium The French 0 vvornment is not disposed to consider Ea moratorium longer tha two years It even considers this delay skeild not be acoorded or maintained unless Germany a000mplistes the indispensable effort in accord with the Be2aration 0 minission or ro organising her finances and anlosa she takes the nsoesear steps for the emission of 1 ans destined 1 for one pert to facilitate the equilibrium of her budget and the stsblistion of the mark 2 for a balance to being the amortization of her c pital debt as soon as the meratorims goes into effect oncerninL the extent of the iser loriu the French uovernment considers it necessary to maintAn the payment of the exp uses of the mien of caseation such as they have been fixed by the ar angement of 11 march 19a the expenses of the Inter Allied High Comsission of the Ithenish Territories and of the illitary and Naval Commissions of Control 0 2j Paper in cash under the co editions hereafter indicated al Yayment in kind under the conditions laid down by the Treat and by the greements now in effect and the other obligations oloaring houses restitution eta th t the treaties auk conventions impose on Germany will be moreover maintained under tno conditions which are 2 ow in forms Guarketeee Anoe the three ye acs w doh have just passed stowed that it is im possible to have oonfidonoe in the execution by Germaly of the orgaGamonts under takes by her the French goverment regards the seisure of guar intees as incite onsable and it considers thA the realisation of the guer mtees hereafter set forth will not exceed the eapacity of payment of Gemeasy and are not of a nature that will hinder the recovery of her finances These guarantees will be taken 1 In order to assure the execution of the conditions of t v more tJrium not only in rogaru to the re organisation of German finances but also in regard to the restricted payments provided during this period 2 In order to iourentee to the Allied Powers the ocntinuation and the extension of these payments upon the expiration of the M erAorium if Germany e at that time has not t ken tre necessary steps to dequiot herself of her debt wrmolly If loans suflAciently important are contrasted by Germany airing the moratorium and Int at the disposition of the aepar tion Coemdssion to mortise the c ipital of the German debt the oash prodwed by the hiar atees amd either a part of the Leymonts in kind or the is equivalent midht be left at the disposi tion of the aerman government to apply on the amount of tine loam But the French ovornment thinks that all useful steps should be taken to assure immediately the productivity Of the guar Jatees of which it has considered the seizure and to see that the organisation to be created runotions to the ex tent tilit the circus mt aloes shall r nder necessary The program elaborated consists of the the French government has far as possible any new seizure of definite czar aiteos however ameliorated this progr m so as to avoid as military ooctvation except in oaso not conform strictly to oll where Germany does two obligations that the program imposes upon in which cL se the sanctions set forth in Ghapter lv hereaftor utll matically into force The lliod Pverhinunte agree either to her enter auto apply the sanctions in cartoon or to ma o no objection to ezrime of the govuxumente applying them of its own acoord 2he french Lovern entn is persuaded it to impose program and collaborate with it that if the Lllies acoe t this upon the Jelrench evvermiont it could be applied without any serious difficulty anu that any movomont of troops on non occupied territory would be rendered unnooessary Detailed explanation will be furnished on the follow ng articles of the progress of which the resume only is hereafter tj Ven Unardutee destined 1 to assure the delivery of payments in kind a inter llied maga LOA of ontrol formed of enbineors of which the president will be reason and in which tilt votes will be deivided in proportion to the deliveries of coal due to the powers interasted will be sent to seen and accredited by the German overmaant erith the powers necessary to inspect the action of the Kohlensyndloat and the prosident the strict either to tide syndicate or to the German Transport Arvioes apdliaat1011 of the drogr Ja fixed by the leper Um JOinaila The inter allied zihineland High Oommiss orders in the hakor territory to assure by means of modem Liven by for ion shall have polar 63ve the execution of he dispoel tiona taken by g their swab licenses dm She orriultation above demerlted madam tram similar eMses in nonsecupted territories Framis Will ONG rise to Tocsalar or noroonal p4mb1tica to be we neenesi by th4 milltxy tribunals utdokisny delegate their Pdveks is liSSO of neesseity to Gorman triboaals This method of control if it mere set Ibilahed is sitima 4111es would Mistime witboat further allithry ocowatieS gad O OAP jr WAIN the establishment of a oastomm barrier iet the amt The total sollast from the oolleetiens oiat as valued at spores mately 443 million geld marks par year itidaELALAVIgaild tt the lifizzlanaLeallat MIA ALIPAILALIAL ffinstaLutusLiZi e L 93 tit 2alai la spite of the objeetteas onprIssed4 the roma toverament op lists is thinking that It would be daiirable to ramostab isiiihe eSeemio regtme in etauted by t IMAM Gontbremse of narehe 111 aertJln opposttlea menifostaa r afar is ism of the llies the free gnwoumento in the ease of pledges taken in oonnIon rdould be disposed to allOoA tie W I 4 14c pROWOROs The ImSerPkilled Ahiseleht vemmissims Al sissolvo the posers to assure under its orders tbs optimal of UUAtOSO VONealos at the welt frostier of tne cmoupled territories territories and oce 4pled eel within th OlAMOO beumiarlee of the of the Air It will hove th poor to detwraise the gift of the whIeh will be Table in swot tames appreciated otimlealso the halms to be Aid in perm maries A Gramatssisu stems the lime et the sesdit ions buil ot ted Ititimoload the ressellug pareirepit Sigma or Wed sestrol will be eratudeed imder the order of the ism SO WPM that the duties dap from the experts the Wortottens asessieg is the territories above summorAst have Set Won paid in s 4 1 em MOW SO to subvert the messurws t bun within the emstons boundaries of the nonmoompla territories or dot eab jeot to aurealliamee by the 411tSs This method of oontrol Ocoee not acquire the terrier Avian eetehlletmeml et stAullaga to ties east of tat mingled a territories ad espaolally in the Ruhr Basin the value of the oollectiona can be setimated at about 200 million plci perms per Year of which 150 will towns free the ooeueied territories if far example 20 of the export taxes were oollooted in appriciated currencies the mount realized would be 20 million cold marks plus st the ourront rate of esehun6e 324 milliard paper marks hire of 0 taxes lathe eoeuoied territories and in tle Auks Desin The German govern meet shall be notifieU that the llied Powere give to the Inter Allied Rhineland High eare dasion the power to colleot for the coeunt of the Aeparatio Commission the opal tux in the owes led territories and in the Ruhr Begin The e roprietors of the mines will be requireinto pay in foreign currencies o art of the taxation 3A for example The prop rietors of the mines will be notifed that in the event of this re eirement not Wing relfillad tha lied pollen reserve the right to t ice possession of s oorrosponding value in call un the basis of the results attained durint 1 22 the anumul uroduotiau of the Ruhr and the ocolvAed territories amounts to about 100 million tons On the basis of the actual value of Ruhr welt the cee1 tax amouetihz to aboute 4 gold marks per tale it Omelet procure the equiv4lent of 4a million gold marke of which 120 mil ions should be ayable in Appaeciated currenoies and the balance in arer marks or 3t the actual price 600 milliards D Utilleetien atAge ever mcrke reEllaftklEatheme end Aal Tax The securities seized would give the ilied Owere the eluivalent of 460 millions no 3 d masks in paper marks of whieh 180 would be realized from customs and 2ao from uoul tax In all it oan be hoped that a not productivity from cueranties taken valued in gold marks on the bases above indicated wculd attain the relieving amounts 1 airs execution of the Jeehedule of Deliveries of coal of the Reparation Commission Deliveries of VeCld Azote Deduct ion of foreim ourreneies on exporters 5 seizure of exportation taxes amauat collooteu in ourruaous fort gn ill i ure of cool tame amount collected in fOrbiLn lire miss T The exeoution of tin ichedule of larents restricted to the period of the moratorium would then be guaranteed the right would be given to to 1lied Powers to inoreaae in case of prolonged defsliatin6 of the Re ch the annunt of their povments notably by an increase of the coal tax and of the deductions in foreign currencies either on the coal producers or on the export taxes The guarantees set forth mitt be adopted by the Allies in con non may using only methods of control of the economic order without int erve tion by military forces finally the guarantees chosen would have the advantage thanks to the method conceived for organizing the exploitation to permit an energetic pressure on large industry w doh has up to the resent time raised the principal difficulties to the exeoution of the Traaty of Versailles which has favored the exportation of currencies and gold and ulaokihas drawn considerable benefits from the actual situation in Germany Ln ease tile German overnment does not oehnit to try execution of the present program and particularly if it does not t ace such legislative and administrative weasurea ns may be deemed proper either by this AeparAion Commission or the Inter flied Abineland Bighommission or by the Inter Allied Commission of aagineers to permit a strict exeoution of the program this def ult will mamma osuse immediately nd autometioelly the putting into effect of the following sanctions 1 Military occupation of the districts of seen and Bochum and all that part of the Ruhr Basin determined by Marshal ooh 2 The establishment of a oust barrier to tin east of cell the occupied territories And that wit neat orejudioe to the statement m de sever 1 ti s by the French Llovermment that 41 inexeout ion of the Treaty of Versailles has already had and will continue to have the effect of advenoing the dates of the evacuation of the oocupiee territories 621 To accept such financial supervision as may be deemed by the ailed 20wers to be necessary to see to the punctual carrying out of these reforms cee schedule B 3 To submit in the event of her failing to satiefy the supervising authority that condition 1 is being observed or failing to discharge her oblidations as nap revised to any measures which Allied Powers upon a report of such failure from the supervising authority may unaniSuch measures may inmously decide to ue necessary clude the forcible seizure of German revenues and assets and the taking over of German fiscal machinery and the military occupation of Gennan territories outside the treaty occupation area L11 loans raised by Germany in the national market of 12 any Power which is a holder of any of the bonds to be applied to the redomtion of bonds held by that rower unless and except to such extent as the Government of that ower may otherwise agree In order to facilitate the provision of funds for the restoration of the devastated regions of France Great eritain to agree that 50 per cent of any German loans raised on the Britieh market before the let January 1927 which would otherwise be applied to the redemption of bonds held by Great Britain shall be applied to the redemption of bonds held by Vrance See bottom next page for explanation The deposits of gold which re held by Great Britain as 13 security for loans made to xrance and Italy for the purpose of carrying on the war to be applied forthwith towards the repayment of these loans The french share of the German fonds applicable to the repayment of Belgian ear Lebt to be transferred to Great eritain and aooepted by her as satisfaction of an equal amount of the 2rench debt to Great Britain One and a half milliar a let Series German Bonds to be transferred by Italy to Great Britain and accepted by tereat Britain in discharge of an amount of the Italian debt to Great Britain equal to the face value of the bonds the balance of the Erench and Italian ear Debts to Great Britain to be written off all counter claims by xrance ane Italy at the same time being abandoned he Italian debt to r ranee to be ritten off Great Britain and Irunce to transfer to the A eparation Commission as trustees the net war debts owing to them by Serbia Roumania Greece and Portugal to be dealt with as provided below On the let April 1933 the bonds of the Seciond aeries to be distributed as follows Great Britain France The aggregate Spa zreement Italy ny other Lowers which may ac percentages of these owera cent the arrangements refer red to below Belgium Their respective Spa AgreeJapan meat percentages Any other Lowers which may not accept those arrange merits Piewing examples show the annual sevieg in the interest charge for future years resulting from redemptions effected at particular dates ennual interest saving on bonds cancelled by each 100 gold marks cash applied to redemption 19e7 30 Thereafter Redemption at 50 on Redemption at 56 on eec Redemption at 62 on Dec Redemption at 68 on Dec Redemption at 76 on Dec es 6 45 Redemption at 80 on Dec 31 1934 The schedule is arranged so as to enable Germany if her credit is re established to provide interest and sinking funa on loans raieed for redemption out of the saving effected on the interest of the cancelled bonds and to give special inducements for redemption in the earlier years bale Lee Le B Supervision of German Finance It will be necessary to establish machinery for effective supervision of German financial legislation and administration on behalf of the Allies at any rate until the time when the new arrangements have come into full operation and Germany is regularly discharging her reparation obligations It is proposed that a Foreign Finance Council should be set up with its seat in Berlin The Council will coexist of persons appointed by ereat Britain Prance Belgium and Italy with two other members of eeericein and neutral european nationality refeectively The German iieance ainister will be ex officio chairman without a vote except in the case of equality of votes and will be required by law to act on the Council s advice in regard to all matters affecting Currency legislation The budget fiscal legislation and oublic expenditure Genera Treasury administration prohibitions control of foreign remittances etc This of course means a considerable measure of interference with German democratic independence in matters of finance but such interference is the inevitable concomitant of any method of effective supervision or control The association of the Finance minister with the Council seems to be the only method by wlich foreign interference can be seleared with the democratic machinery e regards the powers of the Council the main object to be aimed at is to leave German administration as far as possible in German hands and avoid direct responsibility for initiative in regard to details in the nutter of legislation The aggregate share assigned to the first mentioned group of Yowers to be divided in irofortion to the respective debts of these lowers to the United states in respect of war advances as on 1st April 1922 rowers other than Great Britain irence and Italy which are indebted to America to have the option of oominis into the above arrange lent and having their debts to european Allies critter off or of discharging their auropean inter Allied debts and retaining their pa Agreement percentages m f the Lnd series bonds 4 Zortugal who is indebted only to Great Britain to have the option of ceding her interest in the 2nd series isends to be dealt with as part of the joint share and having her debt cancelled or of die Charging her debt and retaining her 6pa q reament percentages of the 2nd 2eries Done e eny payments made in respect of unoanoelled european inter 11ied indebtedness to be invested by the neparation Commission in German bonds such bonds to be retained by the aeperation Commission until the 1st April 1933 brat then to be distributed amoneet the group of lowers first mentioned above in the suns proportions as the 2nu series German bond e Powers to which a remission of debts is grunted by treat Britain under paragraph 13 to agree to support any proeosals made by Great Britain for mitigating the liabilities of ex enemy iowers other than Germany under the treaties of Saint Germain Trianon and Beuilly 14 6CH DULE As RedemItion rites of lst eeriee Bonds Interest Late December June December June oember June December June to i eeember erice aising by 1 point per half year co 76 June to maturity iec i Rising by per halfyear to par at maturity Lote The scale allows redemption an an 8 per cent basis at the start gradually felling to a 5 per cent basis at the end of the thirtytwo year period This explanation appli s to on preceding page These eropoeals for dealing with inter alied Debts are put forward upon the understanding that the above reparation plan is accepted and all proposals for the taking of pledges gages and application of sanctions otherwise than as provided for in the above plan are abandoned 4 In the event of eerbia opting not to come into the group her debts to be written down trance and Great Britain should on tra nsfer to the by the amounts necessary to give her the oomeensation provided for in the eierbo Frae co British percentage agreement of the 20th June 1921 say the equivalent in 2rench francs of 70 per cent and the equivalent in sterling of 30 per cent of 250 million gold marks 9It is desirable to give the Council very wide powers but also miWitesecretifn as to both the manner in which and the extent to which they are to be used It is not pr tioable to lay down beforehand any rigid rules as the further degree of expansion of the in regard to such emitted or the further increase which may note issee which o in the floating debt still less to insist be allowed to take on the raising of loans the possibility of which depeLds on finding lenders ehatever form of local control ea be decided upon it should be responsible and indieendent 1 e not subject to a eeparation Commission sitting in Paris It will be necessary to provide that the German eoreign Yinance Council should sit without the German iinance Minister whenever occasion reeuires to exercise the executive powers at present LA MOSSed by the Reparation Commission and by the existing Committee of Guar ant ees If the loparation Commission is retained at all it should be as a purely judicial body with such changes of constitution as ney appear desirable le special powers of the Foreign iilnance Council should expire on the Zliet Locamber 1946 but the Allied Governmento should have power by unanimous decision to re tew them for a further period or periods if thee deem such renewal necessary efter the expiry of the special powers the Council will cease to sit under the Chairmanship of the German Finance sinister but will continue to exerciee the powero which have been transferred to it from the Reparation Commission and the Committee of Guarantees C PLAN AoR cry M1 CW litillARAZNII AID liebilir41 1M1 D i p I7 TZ The follorrin plan has boon rropared as a complete and final settlement of asparatione azd uroean Inter J 11 d 210 Cancan obligati xis under tin ooze Treaty aro fixed by the plan at Llil fbr four years apart from oertsin deliveries in for which rod it is to be E4VOLI against future payments 2 milliard gold matte 4100 millions per annum for to next four years milliard Gold rnarics 4125 millions per annum for tin followine two years milliards 4166 millions or sash smaller nun not loss Ste ten years than 2 milliards as may be fixed by on impartial tribunal If tin supervising authority provided far below decides unanimously tint the state of German finances before tia end of the initial period of four years is such that cash paiments for ra aration can be male it will bEive paver to antedate the denioncietsent of ti n annual pqmset of 2 milliards by such period not exceeding two years as it may see fit ani to male such ii justirents in res bot of future payments as it may deoin to be wuritable so as to acute that the total liability shall not be increased one obligations take tin form of 5 per ont bonds redeamoble at call by tee Ciorman Governmsnt at the outset on easy terms f rnatza 114 rising to par at the end of tblIty tvao years are bonds are divided into two series Series I representing tie fixed resenting payment rising to 2 milliards per annum Jeri s II representing tie additi Payments over an above 21 er anntre from tin eleventh your Mara Se There is no oinking fund but redemption more especially in tin earlier years is permitted upon such liberei terms that tin saving in annual interest on the bonds redeennd will if erman credit is re ostabli hod be sufficient to cover both interst and sinking fund on Armen loons raised in the ra ortmt for redemption purpo see its arrargement gives armory a strong indiscoment to rAse such loans as soon as possible sines she will thereby convert a jar otual into a tortnirrible obliigitien without increase of tie manual oilers aift also ettstitute a normal foreifst debt to private bondholders for per ira lent obligation to fbreign Governments ike baids provided for in the swam are not intended either to be issued to U glittlio or pk Oed on the maricGT They are to serve merely as accounting maehtrerr The Liobilisation t of the Germon reparation debt is to be effected by loans raised by oterma3a front the public ti s p roceeds of which would be applied to the redemption of the on Leal bond In older to give Cermary a ret t1 ahem of restoring budget equilibrium and atebilicin the mark it is absolutely essential teat she should be given ocrplate freedom from papas its in foreign currencies during tin initial period ani that deliveries in trial except in so far as the neeiving countries Ray be willing to ray cash for them should be redttood to a minimise It will however be necossaw tiv t tae deliveries on reparation account of coke to kranee coat to Italy and possibly dye staffs should be continued thou J 1 npOn a reduced scale even during this initial Jeri de The precise quantitLa can only be settled by ingotiation In the event of the plan proving sisscossful it is probable 110cl lirr that Germany ranild herself seek to incrotve her deliveries in kind in t early yoars to a raxinnen in view of the liberal toms on which tie value is aloliod to tie emanation of her debt Are plan muld be offoral to 1 ormany on conOition that she uaiertakes 1 o stabilise tie murk in acoordarne with tie re 001233 Itiat ns contained in tee irsjoriV report of t e foreign experts consulted by tre German Government in jovertber last and to restore bulget equilibrium with limits of tine to be proscribed say six months for the stabilisation and two years for the bulgot refonn 2 To accept such financial suporvis ion as nny be deoned by the ailed carers to bo MOOS sary to soo to the punctual carrying out of tease reforms see 3 Ochodule To submit in tie event of her failino to satisfy the stapervisrinr I xtzthority that ooralition 1 is being observed or failing to discharge her obli ations as now revised to ary mlasurlia which the Allied Powors upon a re ort of sueb failure from the supervising authority may unanimously decide to be ilieeesoary imludinis forcible seizure of carman nvenuss and assets and military occuoation of rlernan territorios outside tiro exiatinc zone of oocupati on 1 13TU The following prop sals at put forward for dealing with interaollied debts upon the understardinrt that toe above reparation plen is acoo ttl aid all proposals for tin ttic in o of pledges roves ani application of saw ti ons o tho rod so than as yirovided for in the above plm are abantioneds t3old deposits rev held by Groat 13ritikin as security for Inter filed debts are to be applied towards the reduction of tile5o debts 2 The let cries ernian Bonds to be received by ronne in res ect of the OolJon Oar Debt and 1 milliards of tOs 1st ieries fonds to be received by Italy in respect of her shark of reparation are to be transferred to roat Britain io reooect 3 Toe balance of the net debts 07 the as botoeon urcotean to be ontirel y of advoncos for the pumose of oarryino on tars war is writton off 311 countor claims being abandoned on oonOition brat the debtors tronsfor ti it intorests in the a 11 Jones 0ontinoont 3onds to a pool for distribution to toose ocwars which are indebted to the 1 chatted Otatoo of oinorica in prop rocion to toeir respective aroarican debts 2he covorning rinciplos of the plan are To fix a minimum ertaan liability which is t rithin reoert estimates watch have been Trade by financial exports of Oormar capacity and a supolopentory Nobility which is prima facie not unduly onorous but wnioh can be reamed or oraoelled by an impartial tribonal if it snould prove in the event to be oxcessive To oubstittte for the present fixed obliontiora of tile oxopean ollios to Great 311 thin arrangements under which all exceo A a arre3 1 percentage which mulct be accepted in tiM fonn of a trio sfor of 14 3nratti oblioations would be remitted but cantor uhich the continr cut Annan pcynents in excose of tin fixed minimum would bo available for discharging urooeen debts to i To give attractive tome to orraany for tie early rodor ption of ti annual payments by m ticioation Toe rimry oblioation of Gerroory is cat into the for 1 of 50 minimal cld statue quo would not be interfered with as ro ards inter oolied post war inlobtadness 6rk thirty tavo year bonds hearing no interest for four years 4 3 er cent for the next four anti 5 p et cent thereafter 4 provision is proposed for a sinkinG fund but tin bonds ear be redeemed on terms Wilt fit if ernan credit recovers will enable the intemst ant sin1cin3 tee on t loans ro luired for redemption to be ra t out of the men I tent saving on the into yet on tip n naa orraarzr is t 118 Avon a double inducement to borrow fro the oriLinal bonds a b the public to reclean overrarents She frogs herself free her 7 ireot liability to the She stbstitutes without additi mal cost a terminable for a orpetual The merits olairsid for tee plan am that its adoption will m the restoration of Jennan credit possible aril lad to the recovery of Very substantial sums for reparation 71111e persistence in the policy of attemptinf to oat ore impossible claims will end in the destruction of the cream alto The present value of the rimary obli tiou under the plan cannot bo 1 recisoly es timatod owing to the radoilption options If the ncloption of the plan led to a rapid revival of 7 ennan oredit and oniony Ivem able by raisin loans to pay off the wnolo of tin fixed annuity in tin first few years tin present value ni ht not be nacre and mi ht rossibly be even less tinn 30 r illiardS gut if this happenod tin 411i s rould nave actually reoeived this 30 milliards and aiirmany a3uld undoubtedly be in a position to pair for the servi e of the 2a3 Aries of bowls ieen they fall to be created ten years hence axe redeem that series also very rapidly In that event this 2n1 aeries would be worth at least cent table 7 4 milliards so that on this supits f cusent talus on the position ten whole melee city would have been collected in twelve or fifteen yoors mainly in the first ten and a p xu sent value of over 37 milli ards on tin worst assumption that no sermon loans become possible either now or in ttn future trfit t m 2nd Jerks of bon ks bras to be cm celled altoOlither ant Germany merely lays the interest on the let Aries as a perpetual annuity becinning oar i jrir ra itenoo at 2 milliards ana rising oar year later at a milliards the present value on tin 5 per cent table is 39 1 Zee burden on c ennony which will be reduced If she raises rtalwaltion loans on favourable terse covers all financial liabilities under tin treaty These are not intended for IS Ste to the public but moreka tie security for the an qual reymonts aril as eounters for um4sos of ace ntinc o La I 1J tL ri EALJ I 1 1 4W 3 lit Erull 3 TTlirZliZril 11 tTI i 1 The existint Gernt911 bonds of and C to be cancelled and the Johedule of azirtents annuities to be reduced to the amounts re juired year by year ip to provide the interest towable on the row bonds to be issued under paragraph 2 2 Germany to le sue to the Zoparation 0orinission a w bonds to be divided into two series a 1st 3eries Bores to the amount of 50 milliard t old mares to be issued forthwith repayable at par on the 31st 7 ecembert 1954 sal bearing interest at toe rate of 5 eer cent per annum poyable half yearly the interest to be suspended in its entirety for the first four years until tee 1st 1927 and to the extent of 1 per oe nte per annum f or the no rt four 7 roars until the let Ta mary b 2nd Series 3oals to tile anoultt of 17 31 milliard T o14 mar ts bein the amount of the deferred i terest on the bogie of t fa 1st aeries compounded at 5 per cent to the let April 1 93e or such lessor amount if any as the iirhitral e ibunal provided for in para344 11 3 rrsv determine to be issued on the let April 1933 replvable at par on the 31st arch and boari 13 interest at 5 per cont per annum payable half y 382 1y If at any time before the let January 1927 tine steervising authority provided for in paracraph 11 decides unanimously that the coalition of Berman finances is such that oash p elements for reparation can be ooreenced eermany to pay in cash such sum as the authority may proscribe in each of the oalenlar years 1925 and 1926 not exceedine 2 millieed eold amts in either year Arty such poyments to be applied to the cementation of 1st eoriee ones at redemption price or otherwise in xeduo lean of the a re gate liability under tile preceding paragraph as the wapervisine authority may direct 3 If before the 1st April 1933 Germany proves to the satisfaction of an iirbitral ribunal that the payments roeuirod to meet the interest upon the 2nd 3eries of bonds exceed her cepaoiev her oblif ation to issue ouch bonds to be cancelled in reole r in part as taco tribunal may decide erbitral eribunal to be appoin oil upon applioatiee V tie omen Oostern rent to be male not later than the let 1atobert 1932 and to cetsist of one arson nrdnated by the dei aration Ooreession one Berson nominated by the eerman oevern oent and a third by aereemait between the other two or in default of agroement by the resident of the Jnited Jtates of America 4 A bends issued and to be issued under paragraph 2 to be seoeyeed by tee allied t8 in cossautatien of all finmolal liabilities of the German Govern cent read nib indisehaeged at the 31st ilecettber 1922 under the Llreaty of Vs r wills to Powm Sok have ratif led trot treatyie including all liabilities under excluding the ereasury bills issued to eeleium in rospoot of the last five instalments of the cash yetymim is Ile in 1922 met y to pay at maturity the bills issued to eelgium in respect of the first agreements with particular Powers in commutation of treaty oblientions but two of telse five instairanital those issued in respect of the remainile t roe in s talmant to be c tnoollod and ti amounts tearoof reoredited to 3810 04 ereaeo obliestiore to rata deliveries of coal dyestuffs timber to continue subject to the various eerlitions in regard to etreetities and prices Otem in ho trcatr Juch deliveries in so far as they may exceed nor an ival nvocimst to be acreed to be poid for by the reseci ive receiving o re in cash unless otherwise agreed between Y ertzly and the ewer ooncerucel ell deliveries within tee now annual maximal or which veer be ado the subject of steel special aere 3mout to be le id for by the reeeivine iterer by sot off against the interest receivable ueen the bonds held by it or until ouch interest n ymauts have be eun or in so far as they may be inaufeloient by surroixler at redeeption price of bonds for cancellation 5 Creretny to have the right to redeem bezels of tee t eorioa as on erg interest date after the 30th junto 1923 at the price sheen in eched ule vete es so et as but not before the 1st eerees of bonds as been redeemed eerroany to have the right to redeem boreis of tee 2ne eerios as on my interest date at a discount of 3 8 per cent for eace unexpired half year 5 Redemption of both series at more favourable rates to be permissible by agreement between eraany and the respective aowere interested subject to the approval of the Reparation Commission The bonds to be negotiable as between the Governments of the Powers to which they are issued and as between these Governments and the hep ration Commission but not otherwise except with the specific sanction of the aeparation Commission Redemption to be effected by direct agreement between the German Government and the roe ective bondholders In default of agreement redemption money may be paid to the separation Commission who will call up bonds for redemption in ape Agreement percentages Nighty per cent of the bonds of the lst aeries to be dis6 tributed forthwith to the Powers entitled to reparation in the Spa agreement percentages Me remaining LO per cent to be retained by the aeparat ion Commission as a reserve for adjustment of accounts between Powers and for the payment of miscellaneous treaty charges as provided below Belgium to discharge her existing debit in respect of her 7 priority adjusted in accordance with paragraph 4 by surrender to the aeparation Commission reserve of bonds of the 1st series to a face value equal to the amount of the debit plus 26 i per cent 4 Belgium to waive her clalas to priority of payment over other Powers in so far as they have not already been met 8 rele United testes subject to the consent of that Power Great Britain and France to receive out of bonds of the let aeries retained as a reserve by the Reparation Commission amounts to e face value equal to their respective credits arising out of the last paragraph of article 232 of the treaty Belgian aar aebt 9 All other outstanding debits and credits as between aowors entitled to reparation and the separation Commission to be cleared as on the 1st January 1923 by transfer of bonds of the 1st aeries at redemption price Debits to be adjusted by transfer from the debtor over to the iieparation Commission reserve and credits by transfer from the reserve to the creditor aower 10 as from the lst Januara l92a costs of armies of occupation and clearing office and other miscellaneous charges up to such amount per annum as the separation Commission may approve except in so far as they can be met from cash accruing to the Reparation Commission Reserve in respect of interest on bonds in that reserve to be discharged by transfer of bones at redemption price from the Reparation Commission Leserve to the Powers entitled to the payments any bones remaining in the reserve when its liabilities have been liquidated to be distributed to the various Movers entitled to reparation in the Spa Agreement percentages 11 Germany to agree 1 To stabilise the mark in accordance with the recom mendations contained in the majority reaort of the Forelm axperta consulted by the aerman Government in Bovsaber last and to restore budget equilibrium with limits of time to be prescribed say six months for the stabilisation and two years for the budget reform The iptentioR is that thew bonds should in no case be placed on the market the mobilisation of the German eatbeing effected exclusively by the flotation of German loans to effeot the redemption of the original bonds The exception is introduced to provide for the contingency of the United states Government aareeina to accept the bonds in payment of debts owing to the United states of see beads Q b per cunt to ale beina 49 per L II1LAllAtion Bureau Lo mnex 111 e IFI Beidele January To the ambassador of the French mpublic 134 3Ia Sir to reply as flies I have the honour on behalf of the Germn Government ily el in writinc on to the commemication which Your eAcellency sods to me or the hymen kmbeas7 dor January 10 and which ve e Nt the w cfc Imo transmitted to in earls by the French 4overn ont the French a d B elan Goverrelente hems decided to take ection with of o comeniesion regard to the luhr basin which they describe as the despatch This wiission accompanied by troops of control of engineer z nd officials thc xect execution will supervise the uctivities of the i ohlensyrdikat ensure take all steps necessary for the fay of the aele r tion tiOMMilliii011 schedule moot of reparation For tnis purpose it will twee dictntortl porers inflict punishment on It will receive full posers to issue orders to and to trade ard employees of the Gomm administration and the representatives of camerae in the occupied territory It will further be entitled to demand aey naeocit tions information from adminietretive departments Chambers of Commerce and to search officesb nines of employers and employees And from business men factories stAlonas rmt other premises from eccordirg to infercestion which htis reeched the Geran Government the red ntise commenced the local authorities the execution of this plan has in entered the Considerable numbers of French and Biagi r troops have Auhr basin in full war equipment of ti ihe French Government bases its Lotion on the deoluretions Reparetioy 131d cool deliveries and Coo Fission regarding tie situation of the Ger 4 tn timber refers to par graphs lir and 14 Of Nnnex II to art VIII of t the ea the treaty of Versailles euilitar opetime it states that for the mome It it is uot considering retlina or occupation of u nature It dos t t it relies on the good sill interest t f cilitte the of the German Government to whom it is of the ereateet Ore German saevement work of the fission lid the billeting of the troops ust tour way te veil s hich the French Goverhnset thus enocavouru to draw ow r the true nurture of ite ziatior The Germge Government declares that the decision of the 1 sper Alor Commis Slop and the above rentioned previsions of the Treaty give no leg el justification for the action taken in the Aahr basin that this k otien constitutes rather violation of international law and of tie Treaty of Versailles the express et temente of the 5cording to 4ilparetion uomnission in its i ot of arch Ll Meg defhult in the ease of timber emu coal deliveries could only he punished by dessud for camh payments so theA further measures under le rfigraphe 17 and seen the regullIr application of paregrephe gre is thia ceew exoludeu lit should stall on y economic tAtu tint natal measures or measurte similar in bind and import noe against Germeny mesa could only be measures carried out by te Allies in territory whore they are supreme Ityld not meUSUIVS ti hioh like tilt present avtry of troops bold officials into the latir basin constitute the mast serious violation posslble of ern sovereignty finally ender the Treety any measures Fat rmissible against Germany can only be taken by all the towers concerned in repurRtion together and not by individual eceers eating Alen It is in vele that the French Government enueuvuurs to conceal the gravity of tell breach of the Treaty by desertbine its tictlen peaceful itte fact thit an army at war strength and with war equipment is crossing the frontier of unoccupied Germhn territory shows clearly that The situ tion is in no way altered by the statement 111kry the French action is Fra me ONO iniginn has no m lit ry operations or occupation of a politicul nature in vie moreover this aticasnt is not ini but is only Week for the time beteg Geren olevernment notes that that only real reason for tail breoeh of As Treaty alleged by Prance is the that thl A Germany has Puttee short toe relatively small extent in the deliveries if timber end float recjared for 19eiv Ater the immense deliveries wklie by Germany for four years in fulfilment of the rmlstioe fled of the Treaty of Versailles with the greatest effort to ouch z41 extent that r powers of rottuotion 4 re exhausted these paltry arrears suffice to eneble the trench Govern lent to el ter Germ n territory in greo t military strength t rd to le 5 hands on the most important of Lierry nyis economic possessions The Oeran Govtrnment formally retests before the whole world agbinst the violence here done to t defencel es nation this violence Nevertheless it vilt It cannot defend itself against ot submit to the breach of the 2rezaty ncr assist in the 0 zotaution of tn Frenc 4 as it is expeoted to do It repudiates OP this 5 130 Nstion the resPoLsibili4 for t11 constNuences falls on those Goverunents ho have carrie out this march into Germ ny be seen in a further depreciz tion of tne mirk and these consequences OUr lrerAdy sudden rise of all prices in the future economic and political consei uenoesAS ctinsot be Gore my long as this breach of the Treaty due to the violent seizure of the co7Are of WOK t economic life continues and its practical consequences not averted tierm ny is not in a position to taii e deliveries to the rowers responsible for this atate of affairs I should be 0 d if you would oommunicatt the hove to iota Government i nd I have the honour to be etc Iiigned v A free elution Inreett o 63 A A IFIST 47 of Brussels Januaro u tO OB Tot ois Oxcelleney Oerr Landsbero In view of Airnanyvs default os announced by the oeperation Corsmission in the exocution of the scheoules laid omon b the latter for deliveries of timber ord cool clod in aocordonse pith the orovisions of paragruphs 17 and 19 of Annex II to Part VIII of the Treoty of Versailles the Bakion Government hug decideo to send to the ouhr o isslon composed of engine re and vested wito tho necessary powere to suiervise the work of tit Kehlensordikut and to eosure by meons of instructions isaued by its Chairman either to this Oyndloote or to Common traneport servioes the strict apollootion of the schedules laid doom by V Osparation commission necessary ono also to toke ellimeasures to ensure the ooyment of Germany reparation oblieotions The It lieo oovernmert hiu decideu to attoch Itolier poolneert to this lesion fie 4 owers of this oppended documents of issioo are defined by the two ilics the Geroao Governmeet Is asoed to inform the outhoritiee eonoerned furnishing them with the necessary instructions so that they oay act in strict encordence with the provisions laid down Zho Belgian Ooverameot lakes to declare that it has no intootion of erooging et present in an operation of n politicol nature It is oerely serding to the Ruhr a oission composed of engineers and officiols the object of which is clearly defined ft is to see that Gerwomy resoeets the obligotions sawed by her under the Treaty of Versoillee No it is sending Annex to tiie fir only such troops as re 10 006ftry to protect the ission eed to i nioruntec Uiv excution of its m ndato here Wi1 t therefore be nu disturtrt of cr oh nit in the normal life uf the population which mul continue to work in peace end It is to the greatest inter at of the german GovernmeLt to facilitate the of the lesion un4 the installation of the troops sent to erotect it Beicion Government counts on the good vill of thte Germn Uovornment nd on th t of 1 11 x thorities whatsoever If through uty manoeuvre the per Alone of the offici is of the AIIIIi0M and the InsUAlation of the rommpanyine troops are hr apered ur endamgeng4 allt if 4 r 1 act or failure to et the longl authoritios prejudice in am erg tie material nd economic life of t o distriut all mosesary measures uf coercion will be i X011 nd penalties ii9posui r t oVerirnent the diseretion uf the Belgian AIWA 1734 b V 4807 T V1131 42flell paacH DUST iY OF YOUIUM kffi Liti kLIJUDLIC tuagai t Cal eY Herr A T ny I have the honour to address herewith to Your roy u notifim tion to the German Government in whit vernment of the public informs ced to it of the assavirfis It take as u result of Germ ny s allure to carry schedules laid down by the Aeparation ormilission for es of timber and oml to France Th 1 MOSARree IS tlestion are taken by virtue of of annex II to tart VIII of the Treaty of Versailles mply no intention on the part of France to engage in oper tions litary nature or in an occupation with any political object I venture to hope that the German doverrnent will tilace acles in the way of these per them and so render the mea IDS which would be maculated task of the ton Governments more ult I have the honour to be eta January 1 e 1 AJ Tier of Uermanyls deVlalt os tnruroed by the iloprtr tion Oommission in the execution of the soheuules 1 sid down 13 the lttter for deliveries of timber and 430 1 to France ard in aocordAnce with the provisions of psrfraphs 17 d 13 of Annex Ii to art V 11 of the Treaty of Versa lies the French Government has decides to send to the iuhr Amnon oomposed of engineers Lnd veJtei with the rocessr powers to supervise the ork of the 4oh1ensyndiket and to ensure b means of instructions issued to its ChatIVINI either to this syndicote or to ilorflan trt nsport services the strict apvlication of the schedules laid oc n by the ep r tiou Com 1i4sion toil tile to tt ice as11 neoessc ry mewoures to ensure the pfiyment of kkrtasny s doparutiom oblicatiors ate Italian OeVernment has ciecided to LIttainh ra to Loin tailors the owers of this are tiefin6d by t3 t two kocusents of which the German Government is eked to intone the uthorittes concerned furnishing them with the Beesontry instruc tions so th t they nay act in Strict accordarane with theprovisions laid warn The French ilovenrrent wishes to declare it has no intention of engesgins at present in operations of a military nature or in en OCOUplItid 11 rith ate politic 4 object It is merely seT ding to the liuhr a iiission composed of engineers na officials the t bject of Isiah is clearly defined t is to see th t Oerm ny respects the obli z tions assumed by her under the peaty eif Versailles 400 vAp Lc ilE sex 17 k a It is sending to the tuhr only Alch troops us ere noessfiar to prdsct the lesion n ti u rantee the cxsoution of to Its mand Ae Zhery will therefore bt no distureLnoe of or cavvge in the normal life of the population which ma oontinue to vork in pow mg quiet It is to the greatest interest Of ibis GOrmftli Gostivwent to facilitate the roe Of the JAsslon and the installation of tNe troops soot to protect it 1110 erenoh Covrnment gavots on the goodamill of the aermen 4everament and on th t of stil authorities r ha If throw h an7 rfartoenvre the operations of the off i cials of the ASSiWA and the instellation of the aeeompsuyig troops are hampered or enikincered and if by any got or failure to t ct the local authorities prejudice in any way the materiel and econostic life of the istrict all SIDOOSicilry 71esures of coercion will be takes ant penalties imposed at the discretion of toe Prench JiovornAmst In view of 6crAy a detAalt as announced 1 5 the Alperation CortAssion in tix xooution of due under too acheulest 1 4 id do l b t timber co 1 deliveries this t omnission ara in order to enoure in future the strict c xec ition of the reph rntion col uses of tie Zreaty of Versailles isslon ortrusteu Nith the supervIsior of the mines and t etorios in the occupied territories told composed of ereineers and officials is created os from this ds The erginecru and officiE1s of this A ssion hull have full powers to require of 4 inistrative orgy nisc tions Chambers of Commerce employers 4Ai emplorease assooiations industrial nit cam erciA groups etc all statistical and other information that they sly see fit to sell for throughout he occupied They shall have the rifeht to oiroulLte No 6e09 e Annex Yee d territories to enter filmes mines fectories stations etc and to oorsuli in these pleats all eccounts end statistic el documents The staff of the Gerehn dminietretion end the represettativec of industrial and commercial groups must under eevere penalties pleas theemelves ht the entire disposal of the eerkers of the the iseior in perfermenoe of their duties end least comely with ere orders hich they way receive from the Head of the elusion The latter shall have the right to sloe ere chnges be eel desire in the uohedulee of the distribution of fuel or in the routes taken by trucks end barges cerrying fuel The engineere srd effioiels of the lesion shell bear a spe lel service order delivered by the militery euthorities which shall serve as an idettificetion ere from Jaeuery 11 leee t e scheenles of distritution of ceel aed cote drawn up ekgcerried out by the eohlersyrdikat shall be submitted to the aperovel of tile indestriel mission of the euhr which shall have the ewer to revise teem if it ases fit These sorer ales shell in particular it clude the total del ivere of tee quantities stlpulateee ear tbi eleiex eountrieer for ehe eccleeeed territortee oe the left bare of the Rhine 4And se 11 meet tile reeulremeeett of the territariee evly ooeupied ith these aneeptiors there in re chenge in principle in tee generel dieteibutiou of fuel now in foroe In O4so o r feller on the part of the hoblensyrelket or the menet to comply with the above stipuletiens or in arse t e qualities deliveree should prove unsatisfectory severe penalties would be impOsea ircte yeAk tly of the chleges in the routes of the trains or barges which might be ordered by the industrial mission Frequent tents will be made by the engineers of the misdate to Ski sure that the orders of the eohlensyediket have been correctly issued and strictly observe 54 141Copy Paris 27 Decemuer rue de Tilsitt Honoreble A 3 iioughtora American Ambessador Amerieen Smbessy Perlin Germany Dear Mr Ambassedor There is transmited herewith for your information a copy of a letter received today from the General Secretary of the Reparation Commission The Reparation Commission in a leeting yesterday after having decided by a elajority vote that the failure of Gereleny to execute in their entirety her timber deliveries to France during 1912 constituted a default by Germany within the meaning of er 17 of Annex II Part VIII of the Treaty of Versailles further decided that this default should be formelly noti 71ed to the Governments of Great 3ritt in France Italy End Belgium and that a copy of the letter of notification sent to these Governments should be for enrded to Tashineton through this Deleation for the information of the United Stetes Government The Commission in the slime mooting subsequently to the three decisions which are quoted in the attached letter and exercising its powers of interpretation which are derived from Per 12 of Annex II Part VITI of the Treaty of Versailles unanimeusly decided that the word 17 of Annex II Part VIrI of the default as used in Treaty of Versailles signified voluntary defeult as used in Per 18 of the eane eAnnex If the enclosures mentioned in the Commission s letter to the four interested Governments there are transmitted for your inforeition copies of Reparation Commission s Annexes 1665 a b c and 1666 a h incl being memoranda by the Commission s Service of Restitution and Reparation in Kind concerning deliveries of timber by Germany during The extracts from the minutes mentioned are not aveilable and will be forwarded re soon as received I heve the honour to be sir Your obedient Servant Assistant General Secretary COPY r reen Paris 1 ted January 5th 1923 scd 10 43 ran ecrptry of tote Ashir tor D C 6 Jolu Ty 5th root Uscelinneouti repnrntion receipts lecember 10th to 30th Luxemburg coal coke 61 848 pounds credit Bel7ium 11711ICK ViS8 lloyder JAMES A LOGAN 0 a Paris 18 rae de Tilsitt 5 January 1922 PLRSONAL CONFIDENTIAL 1 y dear Ben Enclosed henwith please find draft copy of Linutes No 343 Exhibit A of the meeting of the Reparation Commission of Jecember which contains the debate within the Commission preceding the report to the Allied Powers by the Commission of Germany s default under Paragraph 17 Annex II Part VIII of the Treaty regarding shortage of deliveries of timber to France during the year 1922 letter reporting default Exhibit B The debate between Bradbury and Barthou Preceding the report of default as will be observed from the dnutes was fairly spirited As a matter of fact the actual debate was more acrimonious than the record indicates as many of the more controversial phases were expurgated by the mutual consent before the i iinutes were finally drafted The French in forcing a report of default considered its technical more than its practical aspect in strengthening L Poinoareis position during the meeting of the Prime inisters in Paris As a matter of fact the actual value of the shortage in delivery of timber on which this report of default was based was aperoximtltely P a relatively insignificant figure The actual French position concerning deliveries in kind under the Partial Loratorium of Larch is open to some criticism It will be remembered that under the terms of this Partial 1 oratorium Germany was required to advance on reparation account during the calendak year 1922 a cash to the amount of gold marts and b deliveries in kind up to the value of gold marks The cash actually advanced including the six months German treasury bills accepteu by Belgium in lieu of cash for such instalments falling due August 15 September 15 October 15 November 15 and December 15 amounted to gold marks In other words an over payment of gold marks As to deliveries in kind the Partial Leratorium fixing the value of deliveries in kind at gold marks provided that of this latter sum gold marks should be delivered to France and gold marks to the other Allies insofar as France or other Allied Powers or their respective nationals may call for such deliveries As concerns the gold marks deliveries to other Allied Powers such Powers duly called for deliveries 1111 to the full value of their allotment and deliveries up to substantially such total were duly effected b Germany As regards France her total calls for coal timber etc amounted to only gold marks in addition France was debited on this account with gold marks in respect of deliveries of river craft and with gold marks in respect to Armistice deliveries In other words French calls for deliveries i kind amounted to only old marks thus leaving a balance of gold marks of deliveries in kind primarily intended for the resteration of the devastate l areas uncalled for This results that the failure of J A L Jr 7 0 Governor Strong Zerscaial ani Confidential Page 4 the friendship of the var ious r eopl es and Crlo verzrx nt s for each other The French are particularly bitter against the British for the reference made in that part of the British propos 1s ccncerning interallied debts which provides Gold deposits now held by Great Britain as security for interallied debts are to be applied towards reduction of these debts The British informed us confidentially within the last few days that approximately pounds sterling in gold included by the Bank of France as part of its metalic reserve and held to the Bank of France s credit with the Bank of England was non existant as a French aetal reserve According to the British statement the metal in iuestion Vlas transferred during the var to the Bank of i gland as a guarantee for British loans to trance and subject to repayment to Frame on payment oy France of its debts to Great Britain According to the Briti sh the Fre leh desiring interest on this deposit agreed to the British using sane for American purchases during the wa r and the gold in itzstion las actually shipped and disbursed in America The British then referred to that they termed the deliberate inaccuracy of the Bank of irance s report stating that when the actual position of this gold was realized it Aiuld have a serious repercussion on reach excharge rho Annual Repo rt of the Bank of France for the year lS2l on page 19 shows under the heading iietalic Reserve the following On December our gold reserve was the following Gold on hand Gold deposits in foreign c ountries ran cs tal I In the figure for the Gold deposits in foreign countries Frs represents the loans of gold agreed to during the course of the war not on y to the Bank of England but also to the Briti4sh Gove onment in consideration of ere its opened to the Fre reh Treasury Remember that these gild loans which at one time attained a total of are to be reimbursed simultaneously with the liquidation of the correspondin credits L r examination of the p ertinent portion of the text of precedinp Annual Reports of the Bank of rance since the original transfer of this gold was effected gives counsub startially the sone rezarks in explanation of Gold deposits in for tries Therefore whLie the presentation of the osition of this particular portion of the metal reserve by the Bank of France nay be somewhat misleading sts the basis for the allegation that the Bank of i rance s report there scarcely in it self is Adelieerately inaccurate B ovever the f act resins that the metal reserve behind the French paper currency has heretofore been generally accepted as being the total figure indicated above and not the total alone of Gold n hand which from the British statement appears to be the actual extent of the real metal reserve held by the Bank of France Even the official coraluni ue issued by the French Foreioi Office Exhibit H while presenting some controversial features as to the position of the gold in England is far from convincing as CONFIDENTIAL January dear Logie Since say last letter dated Deceit ier 1 I have ours of December IS 14 22 and 23 all of which e have read with great interest as well as the enuloeures which eccoceanied their Lf c ouf3a one cannot help out feel a good deal of sympathy for the predicament in which Bradbury found himself when the Italiene and Belgiaee decided to vote with the rench can the finel eecieiou as to timber defaults I was a good deal impressed with the significance of the statement coeteined in the Gereee reerxeeedum ycu sent ee ao to whet eight be gathered in from the operation of the forests and mines owned by the the whole t 11e is really eitiful arid especially Governeent in the Rhineland from our standpoint over here when one realizes what the decisicn to occupy the Ruhr hue dose to public opinion iet no ties eiece the end of the wer had public opinion been eettie6 so strongly in the directionlrtakieg some part in aiding economic recovery in Europe so as it did not involve entanglements This Opinion was gettin stroaaer in almost all pe Aione lnd strange to say seemed to have had a real outburst in eoee parts of tile eitdle Nese it is eseplained ey the fact that the farmer have come to realize ttat they need foreign rarkete for IC or per cent of all that they proeuce and if tnlat s go to sneee l ie Europe they may lose those markets and he obliged te curtail production 3eside e that they have been educated to realize the eetent to wiect their domestic prices are fixed by world oricee fbr practically all of that sort C thing thet re do ezport es you know the situation got sufficiently impreseive to lead Borah to introduce a resolution in the senate askine the President to call an economic onferenco Secretary Hughes de initely indicated that he would be willing to do so if we were asked by foreign governments Senator F obinece introduced e revolutioe c 1 inG for the appointment of representatives on the Repare tions Commission and it really looked as though the country ware waking up to our interest in econo eic ef elirs in 6 trope when this decision by the French to move further into Germany I believe shocked public opinion here e good deal One result wee the passage of ft resolution by the Renate with onLy a few dissenting votes suggesting to the President that our troops oe withdrawn from the Rhine You and 3oyden doubtless have in rind that while ycu get a picture of the situation built up of all of the intimate details of what is transpiring ell that the greet American public sees is a depreciating mark disagreement between the Allies disorder and disagreement in the Near East and finally what is interpreted as a military eove evilest lermany It all strikes thee 13 8 the height of folly and sadness This is the atmosphere i which the l eritish Coreraleeion arrived to negotiate the debt Fortunately where the French have sufrered the 3ritieh have gained and still am not sanguine that they are ready to propose an January adjustment of the debt that will come within the limitations of the funding bill I nevertheless have hopes that they will make a proposal which will contemplate that the debt will ultimately be fully repaid in some businesslike fashion and that the program of payment will be so reasonable that the Administration can submit it to Congress with reasonable hope of having it approved by special act This is the best surmise I can make of what is going to happen Business is beginnir to get up suite a wholesome boom and we are only hoping that it will not develop into an unwholesome inflation The astonishing thing that we now observe is the continued maintenance of our export trade notwithstanding conditions abroad but we are also importing a good deal and of course it mace very large loans in various parts og the world I hope you fellows all keep well in Paris and that you had a good holiday up in Switzerland Bill Williams cot home safely and told us something of what you had been doing new and Stabler have both gotten over the grippe although I think Nemo has felt a little shaky for was quite ill Winslow is living in the house with him and both ycu and 3asil would be deli hied to see how fine the house looks I have teen troubled with a severe cold myself It has settled in my vocal cords so I will let this pp as it is to day Please dron 7e a line if there is anything particular in the way of news that ycu would like to hear from home My best to you and Basil Sincerely Colonel James A Logan Jr 18 rue de Tilsitt Paris France 33 11M Ao 8828 Annex 1731 b Jarraar Th3 GENIRAL AUSTRIAN SITUATION AT The a GINNING OF JANUARY At the expiration of the second period prescribed by the Geneva Protocols when most of the external parliamentary guarantees have been devoted to the Austrian loan it is possible to make a survey of the situation The Swiss franc which on August 25 was worth 16 000 crowns is nor equal to The creTal is stabilised below 15 000 paper ccrins per gold Grown 14 33f4 at the pres Int moment This etabilit and the re of exchange makes it possible to estimate tho cost The cost of li ing has decreased duGtion of the margin of profit 3 C10 and Zip silkhtly during each of the t A e Sire November 18 there has been no State infi tion No new Tieacu7 y Bonds have been received by the Bank of IS milliard as sgaLnst 2C62 6f cl edit to private individuEi Inflation y Lai moreover been reducer cemixi cial bills dropping from 900 milliards on November 7 t 672 millta de Dese Iler 2 ber of croons in cirGuldti n eta in re4 74od oniy T le num alot of the retum to the Bank of part of t ae foreign currencies hoarded by the punie as a result 1 rerzewod cenfidense part of the working funds ez e1x3ssed in bills have been converted into crowns The sold value of the crown reserve 280 millions instetA of 1 milliard in 1919 having been inauffisient for the requirements of the market this spirit of confidence would have led to a rapid rise ih the crown invol7ing a serious economic crisis if the policy of the department for foreign currencies had not boon to profit by the situation to constitute a reserve of foreign securities purchased on the open market against crowns put into circulation therefore by real securities These are all emerod The value of the reserves in curren cies has increased from to 4 millions and the 4 000 milliard crowns now in circulation are better secured than the 3 000 milliard crovrns in circulation in November Annex 1731 b All these fomign currencies are obtaind from the Austrian public which still Possesses large reserves A portion was changed directly another portion was handed over to the State when the internal loan was floated and converted by it into crowns in this way The Treasury of the Austrian Government has therefore been normal The second period prescribed by the Geneva Frotocols was covered solely by the resources of the home market in add million j old crowns recoived from the Banks 230 milliards that is more than 16 million in gold have been collected from the public It is hoped that the issue of Treasury Bonds expressed in gold 4hich may be suibscribed up to January 16 will produce a total of about 20 millions For taw future operations are being considered for the utilisation of the balances of French Italian and Czecho Slovak credits the French and already announced that have Czecho Slovak Governments repayment of their advances only out of the pro ternal loan although the vote of 80 of parl l a obtained at once and that under the lsst para o Protocol II immediate repayment May be de tion constitutes the first real support from ble to float an external loan on the basis of the Austrian gold obtained from the liquidation l Bank the assets will be utilised septrately ce is no J preparing a scheme in this connection ounts to from 46 to 48 million francs that is crowns the Czech balance amounts to 81 million milliards and the Italian balance to 68 million s that is a total amount of about 630 milliards nt intends finally to give to the National Bank old obtained from the liquidation for the re e Treasury Bonds a temporary operation might is rhich would furnish more than 200 milliards been entered to the account of private banks 3 annex 1731 b hich advanced 100 milliards to the Government but this operation mu t involve a corresponding increase in paper currency Although this increase is limited by the amount of the security and is not an unrestricted inflation such an operation might be criticised and would therefore be frustrated as soon as the previous operations were the gold might then be sold to the Bank of Issue and rept realised to it at the same time as the balances out of the proceeds of the future loan In any case only 100 milliard remain available that is a total amount of 730 The Austrian Government still has available gold amounting to about 5 millions collected from the public and deposited at the Lint value 70 milliards it also has the net profits of the former department for currencies that is 300 milliards half of which is in securities The total value of available assets amounts therefore to 1100 milliards which should be entered to account B This sum will have to be used to cover the deficit of the next few months delays in realisation may however occur in regard to eer tain of these assets and in any case the redemption or funding in gold of the internal bonds on June 1 calls in the meantime for the preparation of the external loan It is impossible to redeem in five months out of the returns from customs and tobacco the capital and interest of these bonds the three months interest on the in stalment of 30 milliards in gold not paid to the banks for the second quarter is henceforth kept in a special account In October and Vovember the returns from the above securities amounted respectively to 163 and 179 milliards For December the sums already entered in the account amounted to 122 milliards in less than a month as a result of the economic crisis the gross returns are moreover less than these for previous months All the sums placed at the disposal of the Austrian Goverment to cover its weekly deficit have been gradually released from special accounts as a result of a request addressed to the General Commissions This was for the liquidation of expenditure incurred might be deferred but not avoided the payments 4k 4 Annex 1731 b On the other hand in the establishment of the preliminary budget for January every effort Jas made to restrict the estimates of the various Departments in order to ielduce them to out do n expenditure The sum originally indicated in no ay corresponded to the figures estimated for the period Januarp July 1923 It is obvious that from the first month of such a period it is impossible to put into practice all the economies and increases in returns hich are distributed aver Six months the extra oeficit on the beginning of the period should ho ever be small enough to be covered at the end of the period in order that the total expenditure durine the six months may not exceed the estimates The iluetrian Government has therefore proceeded to suppress expenditure anti on the basis of the schema of revision annual expenditure 600 it illions gold it has asked Parliament to authorise an expenditure of only 200 millions gold during the first four months The estimated deficit for January is 404 milliards that is 13 milliards per day on the averade adopted for the first six months this figure represents a surplus expenditure of 21 ellliards and a decrease in receipts amounting to 44 milliards which is explained by the fact that the returns from inoome tax are collected quarterly the next collection being in arch On the other hand in relation to the October deficit 572 milliards it represents a possible reduction of 168 milliards be at least 150 milliards it is hoped that the actual reduction Will For the first eifrht days in January only 80 milliards wore released The scheme of revision has in fact already come into force Up to the presensi more than 27 000 officials have been dismissed December 31 being the date fixed for the dismissal of a large number of employees It is anticipated that the law on the reductidn of up ff Jill be revised in order to make the provisions more effective the law on pensions ill also be revised with a view to reducing the rate of the indemnities granted to persons rib find employment Annex 1731 b 5 The Chancellor has promised that the b11 1 outside the edm aistration on the redaction of the number of lanietries will be submitted to the the Departments of the Amy and Counail before the end of the month the Interior would in particular be combined as well as the postal telegraph and telephone Services Economies in respect of expendi ture on motor oars will be effected by adminietrative means All these measures should however be still energetic Ally applies The new fiscal customs tariffs are already in force increased taxes The indetrial crisis is serious come into force in January number of unempleered at Vienna alone exceeds the In certain cirolee this situation gives rise to a discontent which is increased by the announcement of external loans For political as well as for financial reasons the Chancellor vary strongly insists on the urgency of credit operations abroad Austria hus eueceadod by means of her oun resources in reaching the end of the second period without being obliged to place on the foreign market Treasury Bonds guaranteed by the balances as had been The oonfidenoe of the Austrian public kns exceeded all anticipated reasonable expectations Not only have fifty millions gold been collected but the gold capital of the new Bank of Issue was subscribed without difficulty its reserve of foreign currencies and conse quently its status have been strengthened on account of the change in public feeling After several years of disaster the Austrian public has naturally little confidence doubtless many subscribers in the country will participate in the foreign credit operations They are awaiting these operations in order to assure themselves that their hopes were not without foundation Further sacrifices may moreover be required of the public when the schemes for foreign credits hove beer realised Owing to the balances and to various available Assets it appears that the situation of the Treasury is assured at least until the middle of Larch It is abseluiely necessary to provide as soon as 6 t nnex 1731 b possible for a transitory credit operation which will strengthen internal confidence and tide over the interval which must elapse before the floating of the final loan of reorganisation If the rates of interest of short dated Treasury Bonds were fixed in Jan al y these bonds might be secured by Parliamentary guarantees custovE and tobacco their issue wou1 7 facilitate that of the largo loan by means of which they would bo consolidated or redeemed It appears that various forms of assistance hays been propeced to tho i ustrian Government in t1 13 connection it will be necessary to issue betide When moreover the issue has been placed on the foreign market other resources will become available further internal subscriptions could be expected and a S 7iss loan which has boon adopted in principlei could be floated This loan amounting to 20 millions gold would furnish tho Treasury with very considerable now resources The reorganisation of Lustria has only just begun but it promises certain favourable prospects which cannot to ignored These hopes cannot and must not be destroyed by delay or neglic ence of any 1 ind whatsoevor P 13 4 egi ILLALineik Ammo Tti aUliitUTIAJI211444 1 A IMO lliiit05 Loa 346a 2321a 2321a aUSUMW L b 1 1121A Zaff141 j0V11311 qat 1 be lore 1 e1 frtion Walt introduod 2 The GiOAltilAii retal the letter II afir tidied to the ot 411ission by Herr Weyer rwieestin sa bsarinis on he uestios of the deficits in the deliveries of 0 41 to Fr se duritt 192 9 reform the orsliession took 4100i8lur 011 the roll unit frog the reouh IA deal are Ier zany in default 714 Win IOU Air re the i am Arial un was Na htkfi Armory Mao in det ult within aliti 111 ailn of arro m4oh 17 of Amex II of Part 11 LI of the 7 raty ui VersailAse Lin 4 saemoor Rh 19V the erenoh had entreVitekl to the QOM Lasion a t Ale of the elivorioe of coal nude It i4er ziay in 1922 and bad rued it to deal ire the dePa a a 11y speultin6 ander the re ty the s ion vas net 1 1 fore A ed to ive the Jerson 111 atton a beaswini on that i4c1A 4 a decision Out Oa tale ot her and in riot 4 of the Foo aolouLs 4hd the Wit of jnatioo 4 4ful equity with which it h d always aou zsair wItede the ors dedion cieolded not o rofuso this hearini it w s in huts uirouobtAnooz th st the er oen tiou turd eon in 01111d Ewer st 4Ard th 3 he er inn oversaw had done iLe oast to ur r k st for z he3 ro 1 xes in with aslittle delay zez 308 4 le Of the re vedontat ivez ro uired to 4r SCAlig tion from the It raid in onor 1 su000ed carman Vint of view on the coal uoation ad out ht ff4d roved ri veotole to 1r n a the ree nor at that 390tin r of herr uosen xho had tole ro 7hod to his Earl Jefore ILA Owia to dlf loultied in rd tr41 day his iseeport he Aould not A able to c ttes4 before the folio 1n day ha arson Overnsent sone iflored thx t herr pawn s gyres nom indle onsable as be alone eonit Isolain the situ Lion from the o int of lew of the Kohlonaysdikat Hen alisiohoath would ire explan tion of the amoral Goal situation in emu ye and the f4 orts of the 4er ban 4 overuses LO our acute the enmissions dosands err Luesen would eaolain the Areeedure adapt ed ay the Itheinische estirhalischa Koblensindi tat tee mesentLof representa tiren of the other andioates kg 1 not awearad neesseery an it see well mown that the sulk of tale re rfition a this yradiatte fter the ettu tiOn had oeen esplainesi Toth from the Dint of vie of the or regm overn4mt and rroti Lt t of tr o Oyndialtes the slae Aerivim nit t recluse of the Silation o into the Anert 1 oiraurarw nces Mont TALwazailla Toposed to 4 of tho sltuntion at owe without rfavertin to the dethils which 1 4 alr4 siy fre lently been ezolained semen repreornIt Alves vire acquainted with the 7rerioll 10 aorndtri from its WA ict tion in the craom Tslarn st Ateii that the deliveries by i ernany had oontinasily shown a deficit axocrt in resent of the month or ctober 1 120 it further stited that the o1 talAnn in ftzin its re rhalea of de liveries h d lw ys ti aers ageteent of t to ooul itu tion in ora cy said of the fluctuations in Iernanslinee ale outimt Of the rain re resent tivas could not however adult ettuAtior in erlany fiiotett scootutt had ifil taken of the Fr the no etiatione on the p o mimes the zerrlens had al4sys deelared that the amounts dem nded far e cesdedi altissores ea uoity Urn 4A F r 7 11 was in 10aseasinn of MA information on this point nd uould further draw ottr t Ion to the explanations 1 ven ay the sicheitohlenkommicsar wet e Agetin of the Jemlis ion held recently in ierlin he wao further ot tli ed to contest the st atetnent that auftiOlent t000unt had Wien tilicen in the rro oaresee fixed by the orstii solos f the fluot um ions in to e oat iut o f 0021 in 4evaamy In Jantury 6 as drawn LI for the delivery of tons J se 1 on The outlut of the 1 4st few months or 1921 The avera At monthly out nat from the uhr d arin tlis months tr Ault Deseersoor amounted to tons it h d however considerably doareheed clurin the folic s in iaonths in euruary it amOunte i to 7 6a2 000 tons to tons in jun to tons md in July to tons Herr T did not Ire the It lut tbr Oent xioed 41 e 0e tionai UW2Jvr r icin months of rob and 1 4 as these diqs S 4 No The total output of Germany in wee not the only sourco of so J y amounted to tone z u in 1 al olt to tons r it in Juno walk to the lose of the teeter sart of U er ilea the output tell to 9 00 00U tens in July it amounted to 996d9 000 tons is must to to 10 4o6obee l tens La Septeawer to tons in 00t04er reinired some tons Ala in NOvOliMP to tons ktfeee fLurea wdiflo Lion is Upper Aletwia had all those fi uree mere been Areviously exported oerti in t the metin of Aovem or 7th these difficulties the Amman vvernient bad dons la tsntit lea sate of its best to do Liver the of j per amounta demanded for the illies And of re the eits lon disposnl Burin the delivered rwout 144 of the total quantities et its vriedJAM41111S14 to the on orhotio ily tt e in diesiat nt of Xayl922 saas It hAd rorecver peroonta o after liff11011ileo the salon of 1 71Aer mash less althou h the amount ut its dis Osol was succeeded and tLe maoh gist tier that the erln lovers found in the mast had done its Jest to met the 4110 islands Mil to proof of Farr t severalty of coal in 3eraLsy and the oont basally inoreeeini quaniti ties importet bleb eves esseoded re war ialorts ant Invosed boa tisuaoial sacrifices es Uormasiy in ardor to maintain the to al of the quanti ties delivered to the steal to misty had this all ed to sake washes auroad but the selorienee of the lmit few months oved the truth of the statement mwdo at the leetin of November 7th iind showed thA these of the mould not bs coaintskined in vigor of the continued dsgreoistion LmoumAt tllorted had in f et roOontly been fags mAusily had a repereaciion on the reclined n deliveries icahlat half par haws ark 7hiS to the allies tend oepiilimed the fact to Ailich AtestieS vas drays Is the Frenelt lionorardtsa hat the deliveries to the ntente h4d decreased in the litet Is menthe zai thou the 4essan output had inoronsed The folio An atm wou d show that there had not sea any consider U able deficit in re aru to the aseolnats demanded the Allies The 7 epar Ltion ro r211 ea of deliveries for the spied Jraulry let to I seesaw 3lot 192 con vised b total of tons xclodin the months of AMISS LUZ lee 6 retrlieki that the retor ert of the lebref Herr inutes A 346 a ahoy would 4 Accounted for by the eso losion of the month of owner ihs miler of the eileerepunoy tie could re in LI better position ti ex la a if be bad n 0 portouity of oomparin t he erten f Wiring with hosts Jiould merely repeat th it the deficit Ivan by the renah of 8fr Jven in the ierban statscient die not 4 ain the mcr in litany r nwustions allowed in ord lust cora ae rat 18 WALLMIORWE had net antlered The i Observed th t iJir id the John 3radbure 111 Ittat ti On iv an tv the roolit Dolot tion faint 14114 Lion eceept the fl woe ich hod a on asked by the Am isbion if this lore the ease how did the erne 1 410 Ation ex L in tine ci Var ese esteem the tail peroonta as of lariats at was the quash on eked by Sir John dradoury lb Herr WAL 1ECHR 411 tH tt 1 t ae 2i u3 answerf3d John iradtvaxsr s Itiestion which ho ad not anderet o d to refer only to the cieilveries to rano Ile was iiewovero pro area to Ave the tijt100 of to deliverleS Se iranesit ado tin the eathod enolo ved in the Frensh emo vedtta field dealing separately with the deliveries of oval and oak tine the l raneh 4Vernaont the erlan 2 overisseat hltd always 121 ttasboti Impo rt cnoe to the Litter doliveries Tbe sob evaded had treat delivered to t e extant of 90 4 leaving a deficit of 104 and the ea 1 to the extant of bout d7 Jo shoin a defloit of 13 44 it rama ined to oho th t the dmf loits now not the fault of the Genes tovOrnlant jar ieth 11L1D 211 hab full infonution at his aispaaai and would deal with the deficits frac month to atonthe no of the shier senses of tLe short i4e In deliveries midi the ousntity of seal rejoOted by the vli r lous 4 cmtriee urin the 1111 ntha referred to this had arabxsttod to 368 000 tons or Gok of the total tefiait for the corT 00spolint aeetod ee 1 44 Get JO us were of JI1 rt tOtlk a iM rt aloe in re ird to the deficit in the deliveries to r noe An to 6he fast that that otaintry had J fusel very lar a guamtitise Eerr roAsob o return tu tibia Jestion of rejections later tATII nu t a i nut s o 546 a ese einetee o 46 a err Lubeen would explAn that the yndloates did loctl offices all in their power to ensure the production of the neceesary euantitles by the mince figuren of the deliveries aotually made in their en ehoeed that it was ot always possible to execute the tiret but as eoon i9 the iederaufbauminieterium noted a defioit in deliveries it did all in its local offices to em ee ower in collaborAion with the lossible 3oo the defioienciee at far in this connection he drew particular attention to all that hu been dolle both by the eiederaufteluminiaterium sad the eichskoh lenkommiesar to follow deliverieo ane to ma e them coil 31de 4s fur ae oesiblo with the domande of the receiving oountries Jn frequent oecaelons not oni i during the neotietions on the vroother braes as coon as there was an fear that rumen but thc deliveries Ii4ould not be reisularL carried out neotiations viers opened with the flied experte and on licerL every occacion metals had been fond of issuing from the psrtioulr difficulties Vs J L ATF thought that the experts must have ob t4Aned the impression from these ne 0 tiatione that ier nt ny had done all in her Tower to ensure the oxeoution of deliveries in July let a lottery e handed to the Committee of eu r full anteee in ecrlin for transmission to the e aratiOn in view of the oomplainte v ith reeard to the shortage in deliv eries Turtioularly in ookin slack in view of its erucezioua omen iovernment had on that occasion even offer situation the ed to mete olrohases in gland for delivery to the Allies err 4A iii 7 11 had already r fcrred to 37 the eiffiJultles oaused by the large quantities of soul rejected by the receiving countries another oiroumstanoe v hioh increased enney s diffi oultiou wee the on reparation hue received ileetion of the re exportation of uo l delivered ocouvt uring the last few weeks rr roof uhioh he tboulat would not be denied by the S e 4nutee e46 a e3ela 1 1 irenob representatives thet 000 tone of reparation eel had in one oeth betzi exIorted roe leeoe ierr ine to ewitJerland This oirete4etnoe had been generally tIisonesed in ierN4ny and wee ce lculeted to deoreaoe coneieere bly the good 14111 of zertr tin aentmetore and the lubourine leases e0LAZ asked for leroofo Jr the suppl i of coke to ewitzerland by dealere in lseoe eorrainee 39 I replied that the evidenoe hue been sup err lied to the Moo dos eouillerts einistreee ho wee Lore over reedy to oubmit It in writirw ae ht was eoeuainted with numbcr of the trucke oe loyed and the eemee of the firms whioh hed made theca deliveries The ermar Government had ale learnt thct the Tench Crovernmnt bed been informed of those deliveriee and that it was takiw7 eteps to Ixevent re exportation it re mained however e feet that it oxicted and sac continuin6 40 The j1 11 noted that this stuteeent Lee eoneiderably diminished the weight of err acousation would hoviever await hie proofs in 41 he Iitir observed that owiez to the diffioultiee orr experiences by oertein roil aye in 6ealing with the reparation coal the er in overnment hed suggested the empleziment of other routes and a lerger delivery throueh the iorts over offered aupplice from mines et ix ela OLapelle been rojeoted o he EA moreYi oh had round thz t the uricee were too hi would draw the attention of the operation eommiosion to the fact thet Germany had be un eeliveries of coal ac earl as eeetembor 1919 although under the Tre liveriec until Eay 10th 1920 che was not obliged to bei in delazing this re rlod with no con cession In return from the allied lowers eermen i had delivered about tons which far exceeded the deficit for 19e hie was a Toof beet to feet that eke had done hc r of the met e of the very greatest diffloultiee 14 inutes 4e0a 41 rr added that 141 w e red to submit copies of the orders leaned by the clohrkalenkommiew r to tic yndi3ates in order th t the o Juiosion miclt otudy their ohi raoter nd h ve at its die oral all the neoesear k oouz ents that under the terns of the ommis clones decision thn lincole ehc re in tlo enliveries was to L640 preeoriiied in ounted to tons whA t Ie total of the deliveries of coal effeoted 44 err A r 211 replied that uouording to the fi uros in lie i osoossion C7verri n i 1 d delivered to rr of 00kfl 45 ono 5 9 000 tons k tone of coal t nd 6 000 tons of lignite bri ettes in r6urd to the olestion of strikes the ZEALA other fuer allmichrath agreed uith hi dtily outut asked as to their oonee uencee n Janus and eci rul ry 145 8 said to have amounted to an fc eragr o r nbout 311 000 tone per day Lohilet be fore and after these months it 4tle said to have amounted to 3L0 000 tons 46 h L14 Th stated that the daily out lut in the Ackhr dairing Januar 19 amounted to tone ounted to 3L0 000 tons whilst in eoember 19 1 it had amounted to tons and in ovember 319 500 tons in ebruary it a R C Minutes No 346a S a The CHAI2i iAli further enquired how it was that AV Germany no longer published any statistics in regard to her metalurgical industry Since the armistice no further official statistics had been published giving the situation of this industry in Germany Herr FISCHER stated thPt he had no information 48 as to whether before the w1r the statistics to which the Chairman referred were publishe6 officially by the Reich or unofficially by certain industrial associations He would enquire and would give the requisite information The CHAIRLiAN pointed out that metallurgical 49 industry in Germany had a definite output before the armistice the total of this output was included in the officii 1 statistics In France this figure was still published and he would submit it to the Commission but he could not compLre the longer published in Germany The C AIRLIAN next enquired whether the German 50 Government was acquainted with certtin proposals made by the German Ambassador in Parts to the French Government The Ambassador had requested the French Government to receive Herr Stinnes and other German manufacturers with a view to reaching an agreement with the French manufacturers Herr Stinnes and his colleagues were ready to place all the cOal required by French manufacturers at their disposal Was it their intention that this coal should be ten from reparation coal or was it to be delivered in addition As the proposal had been official the German Delegation might reply without hesitation R I Vinnteu go 346a 2321a 21 A nutea No P C Ulnutos No c4Ga a fforr WALTAIOIRATE replied that the information received 57 by M Mauclere confirmed his previous statownt He understood that u further thousand tons htid been exported by a Strasburg firm to the firm of 3ohaeffer land in Switzerind 7e had received thie information from various seuroes in lormany and witgterind and not from M Le aormund le wsA5 thus in a position to stAte thLt the news had caused some disquitude in lermany 58 The C t d AAN reolled that lorr Wallmichrath had etted that 7 000 tons were exported lonthly from Alsaoe torraine to switserland The only fLot of this nfttnre which had been reported was in filet fraudulent and had been punlohed as M Ileuelere 11 A stated 59 M MAUCIARE bog red lei vo to explain that point hat of the 000 tone mentioned by Mawr Wallmiohrath 2 000 had been trfIced and immedii te vanotione had been applied ea u result The wrench Delegaion would Initiate the lost sot rchinrr enquiry into the 1 000 tons which remained to be accounte3 for Sir J1MD TUMMY pointed out that the tr blo submitted by GO the 7renoh Government showed 19E2 up to 74oember 10th deficit of 17 2 7 for the yertr The deficit for the Month of February was muoh lermor and Amounted to 56X whilst the fiRures for the month of Deoember were not complete ler allmiohrath on the other hand estimated the deficit nt fcr lower fi7ure larking a rough calculation omitting the month of IFebrunry and inoludina the revised figures for Deoember he obtained aplroximately the fi mre of 14 6 to canoe and T uxemburg for the deficiencies in the deliveries lerr allmichrath on the ot ler hand gsvo a fiemre of 6 r for the deficit in the deliveries to all the Allies 411 PC 7 7 Minutes le 346a a 11 err WALTMC4RfiTR replied thet the difference woe due 61 to the fact thet the fiuree of 6 5 4 represented the pereentage after the deduction of the quantities rejected nir 715 N BRADISURT pointoyi out th J t1 the quntitios 62 re3eoted were omitted the deficieney would be inertr ued the Trench memerundu In he underetood thnt the fiFmros were b sed on the quantities ocorted rerr WAT IIICIRA TE replied that the li renoh qure 63 the amount of cool acaor ted and excluded the quantities re2jocted In arriving at the Llevaan fiure the quentitieu rejected were treat d ae if they hied been delivemi 3o that the 6 F really amounted to sir JCff J IRAD1U7Y understood that the figure of 6 15 thou represented the difference between the Programme f nlree and the quE ntities ten ered nd not the diffterence between the votTremme firures r nd the quentities aotually accepted he deficit in the deliveries to the Alliee emittin3 the month of February amounted to 9 0 and not to err WALLMICIRATM roplyin 65 to a question put by lemelmane earlier in the Ueeting etnted that the 2 erman reprewlntrtivee b sod their ottement on the most urgent pro rfmme which provided for delivery of 1 7 million tone in Jolurry and 1 6 in the subsequent months The Prenoh figureu were on the other hand based on the execution of the larger 66 pro 7 ne Sir TTTN BPADBURY observed thet thin nocounte for a pert only of the difference admitte e enquired whether Tern that the defloieney for the eleven months of 1922 oxoluding the month of ebruary in respect of the Pmounts accepted by 7ranee and Luxemburg ae compered with the total of the JownieBien s programme was correctly represented ey the figure Nair WAL7MIONRATH replied thr before giving n definite R C Minutes Do a answer the fTerman representatives would have to make the necoeeary cloulationts nnd comp re the French figures with their own Sir J pointed out that it was very important to reeoh an agreement on thin firuie as boforo pronouncing itt finding the Commission naturelly wished to have definite fi urce at its disposal Importence but one of from A diVerence of 1 was not of much to 4 1 was important err FISCHER thou ht that it would not be possible for 69 the 3 errivl reprenentetives to give a generel reeumo of the pitmelon and t o e nee a eta temont from a juridiael point of view hrd ends his stetement on behalf of the olllon until err eyndikat Le eerie as the evening of Jenuery Gth he had informed the Jommietion that it would be impossible for n11 the reprenen tativee of the 3ormen lovornment to be prevent at tt meeting and he therefore requeetee that the mooting uhould be adjourned and continued the following morning in order to allow err Telbeen to be present The looting wan adjourned at 5 Eu p m and reeumed on 70 Tannery 9th at 9 30 a m 71 The carmen Deleeetion wee introduoed 72 nerr LITB 311 understood thee the members of the joe mission wished to hoer a detailed eta ter t e to the manner in which the oonl deliveries on account of reperstion were oerried out The Zohleneyndiket oroh month received deteile from the 3ermen 4overnment as to the deliveries to be effected It was firet given general dirnotions an to the totel fieuree of the deliveries required deta ils of the proeramme were then wor ced out at so can and the 77ndikat subeequentle received definite instruetione from the lovernment ea to the execution of the proeremme The i ohlen syndikat sent in dzAly reports to the lorlen lavernment concerning the eeeoution of the deliveries These reports naturally did not 27 R C Minutes No 346a a lanu es no 346a 2321a ALt1 2 7 Difficulties Lis frequently Grose eL4 76 the port of Duisburg 7uhrort owin7 to laek of tonnaTe for This reenited in the few d 4ye coamulltion of rolling stock loeded with conl at the norte nd the reilwup were force4 to heck the trnneport in in winter two tIr three atVg0 13 of frost soifficlea to renior the leudinq of washed coal imposo blo 7nhrort could not be sent nnd co 1 roluired forn niebur there but 111 to be el ven wag re Mired there or not different iiroction wbether it nese difficra2tie re3ulted in fresh deficits for Which on ono we 3tvikes in the tares on the reeponeible ehipoin in the ports and elsewhere vInsed fnrt 7 er diffioult7 err uussrn he 8 or refully elmminel the whole of the 19ZE 3011 1elivlr7 seaeon and Ica cacertninei that dsrine that period t7ero aad uaen a Dutch shiving strile a dock strike at 7 1rtmund in ItYly and lboul qenerta 3eriarn rtAlwey etri e in 7abrnnry otrikes brad cleo token pince There had moreover Oeon an interruption of trtffia on the nhine and wren all these dii ioulties were rookonkA together with the small inevitable i corl difl anitles he we bound to express Lztonishment that in spite of 11 1ec difficultiev the 3om mission e progrwe htid been eYeoutekt with 3uc4 a snail deficit qerr 711r7711 had spent 20 years In the Loterwtional coA 1 trede the first 6 of willeh he had spent with the Kohlen syndiket le had hod exrerienoe of transLotions with girlieh Awrican and Jcpeneee minou End worad point ont end any meirellnt wotad anrroborsto him that r deficit of 10 wee genertny admitted nt rt from nny rillo4cnce or stri c es Then he aonaidered the pertlot r diffieultiee of the pro amme of deliveriee im osed on lormny Lnd thy ticial efforts of the tohlenoynditat the 7ormln Governmext the P C I it lutes no 3 46a R O Minutoe ao 346a In tho first pl oe Herr 7nllmichrnth and err Inbsen hilve oloLvly dhowzi tht vyrionci rPineons of foroe mPjenre Ynd oircuosttibac not with o tl e control of the lormen Government hnvo actil oined to the ler7li n deliverir s to fell behind the nTop Temmes fixed irther it otwt be noted tnt lemn117 there iu a limit to the oblimation to melee deliveriee in the This limit le fired at the point nt whioh any oN se of Dues inc reaso In delivortes vtonid be bnand eerionely to ondnoper the exictence of the economic and the internal life of lerrnany It to recoteed in the 2resty of Vert Pince a principle In the reprrAlon lnoetion tAt Oerltcny s obligations to delivories eh 00ld oorse t do iveri m 4D ao P A tho Unit limit 1 hnr otpnott7 to h 71 vital rood u onrid Exi relmion An n nnmt or of provisions mIce This lrinainle I rofor to 274 Parepreph 4 If Annex II nnl evIrTeph 13 of Anne x V 1 it ferthor rectal the strttanent of the Allied Powors in thin nonnection in ht rote donprtneti to the German orag Toleg ation on June 16th 1919 helimvno that the onnnot The lerrtr n Onvornnent 11eri tion Corrninsion it itr deoleion o be ond thin priroiple of the l nit of lermrny s obligption to Ia4e delierion ollpocin177 cling it in pr rtiatlarly ernross48 in the section on mil dolivf rion Gerraen 11 Ir fnot 41oltrnred ell tho norl vhSol B3 1 vr ct in if poeition to Itliver withort P nrvr life Pni p enerni ennnolvr her interml be lieu even reseel 7 helievp there le no need far e to civp r niotvr 7 of sitimtion to which ermon eoonomy has been broymtt bv forced deprIvtion hte on Chia voInt 19E2 Seri enj coal rirop ne7 ration lemnl cion ockvvionz CeirSa dett21145 statcconto on I will only piInt art ono rain Vrit daring aonsidorably inorerasd at 14portation of coal from athsr aountries despite the f r himher i rioes which had A tiJailateo MO 34iab that a the swim of Herr r SSA 3sparatias Oloodoeton ow wale he hal WNW srosidont of the 4rLfeakialltielleart lselent in ario tor al tout 044 ttaing the whole er that period he nod followed the question of seal deliveries with the very greatest attention althoutli he bad not iainself waisted at the intorwiewe betaen the licd tux German experts 4 lorw i allmiehrath hod it lad the day befell matinee antinually toot place throughout the yaw 1932 between representatives of the le men love 3nuseat aiel elrerts d ut th se sett coo the Urns reprosentatiVes nod coatianally uovotod their boat effort to the soluti n of tho problem of ortrrying out in raotico the orLien of the i a I tai whioh were really lisposalhis of ovecutiue fe was finely connived that the Allied roprenientetives amt hnvo salad the oostrieti n from those rolpoated 43 ffivoreaticne that everything possible was boin done on the 4brocn side in those dissuasions r way out et the diffieuIties had always been founds sad a mass disavowed of obt Aning flea lemony the Treats passible quantify of deliveries vegysae on the Tier ti aide had Also ell in his owes Aio lade Vervain be Lfreat17 surprised to ror4 is the r reuoh ate Is the Allies that lemony all y roduad hew doliverios qe was swam that this gels was a political declaration sad thought that the 0111 14 PIMA vift110 4 VA WA a politteal oripageotien net 14 the thenria ex iressell ia ongtot that orvnthon to in the Yrehoh no tie then 4tla rma niche in the IOW of its fromen was S a At as abliD liar aka tAbil Btriff stoteti toot It wail 0011611 forma 100 1 121a b that the dollrerles of eosi for tam your 1 U bat tallest short of the pro foam 144 6 arm Iqr tho omisslofte It was also cocoon mound that the sotaal figures ro wed on both sides tug searly aggsmod 41owing for tit snail disortpaney ia the 3eraru fleillimai to r the month of January anki giving tin misfit of tom doubt In roopeot of those Metros to ormity air ona 34 421 orriyod at an actual nose for tat shortage of 2 million tens or over VW le yea disposed to think that aaottiing 114e 60 of that hasnat vas dam to sautes Mali Wit be 60 soribed as foroo sajeuro enoh as strikes eta Alen was therefor left ft fiefirilte short go of not dm to item reajourog le Us aoxae of oseses width attested tile material deliver of coll 7 ners reteelaiel the inter fluesti al as to how far tam deliveries hod hoes intorfesed with OW filament economic ourreaoy awl flaw At 1 situntla of hat was a point limb he a LA not prose to art lemony is detail at that strres ha AO alswarly dismissed It st VAaidelab1e length in onmotion wits timber eiollverion but he wished to emphasis Its Importune Wi2014 oonsidering wiatior the tailors ma dna to oases attain the ooutrol of the deems Oosernmesis afire lam two sew eolflois ono in 3ir John SILOntEdfle view laseper410 Utast to the smeoptans of the sal put forward by the mesh kirstly there MO the 4isoisioa of the 1 fV Iola of blank list last e Pt Si 1r John 31 ZWAt hot aisOaey stated It sippossoi to his hi at 11I held that view In spit of the majority dastsicia rinitio heti been toVon that Wraission vas bound to deal S Anntes Ltee 34de 31 10 sig deilv lot lea rin i been a matter of VOW i7r3 at di moulty ant had to sea extent oaused a differense of opinion within the COMMileslem itself The e leliseicat followed m policy blood on oempromieho mma pro 311 he been fait c ewel tower tOos ocuo 110hore of the OhNlithel thought acce bable aid laipwr thos some other Imesbere had they been left to themselves wealg Noe been disposed to consider aosiroble0 As policy of the Conmissiln if a policy of ooka r mould be inscribed ia onorol to p 1 s lure la tiro mei bh4in to put cvlustant enema Otwormoont to golivor the maxiLum Aantitins via tah Cron time to time Gould h4 ostraotod frm it regreames t bereft re IreSe Id dOwoLwhish romosonted lir Jon MADMINT thou iat 14 the okiniln of everyone the zeugma mounts Nruloh it emit thettOtt likely emit be extracted from imam visa tne deficiencies were to r the tire beta winirod at th a low to preeellrO alariC11104 At to loroVe Jeliveries over the most period i ntil a few secirs af lo no Motel ine Ignition had been gl Ten b moath by month en tin tee ommtssiqn that these foliar be ert Of tee organ Aseerement trosted as a emu for toMtne Motion nwtor porogrovik 17 of mem 1 4 The last referees mOdeh air aloha 31030Y WA been Able to trace vrith mord to the application of that prelri I ra in au o Motel soamoniaati4n by the Oemaission itself vas in the month of 1111seabsr 1921 ol the 30th December 1921 the iparati a Ceeteeleitiole 14 4 letter to the Paologolk aireiern 04promeed the hope that it will no t be obliAned to Gas Mar the qmostidn of welling the attenti an of the alitod Govoroolits to the fellure on the port of Germany to ful 411 gait r db 1 Ve 1111s 14 rope to Lile del ivory of sea imAressioh no doubt rOilerved lzat extremel7 474orJed the richt of the lonr leei to put 40 4algin so 34 S S j 1 L f tits WWI psirtassain a 17or his own part air John 3 441 UT T il ai fist thialt that tag r alai to the Gowersmonte to apply NI ainVes or onnstraist arisbr out of the applioatiels of pasokilwh 18 was Bleu to produss aim suits as satisfootory as those which had been obtalsoi by ths result opaktilli an up to tho tt seenoti to kin iimpossibls that that questing M bo onesidereti in Tacna altogether amrIP faun the Orval e tinti grastiv ant dare porfornenass tabs demanded faun ilernagir LA the future seuid not attempt the view that rttractraph 17 vim in RI way intend at as a mama of yunisoai 4 e poesy for past defaults italowt Ord to the tics when those ilefaults were oennitteds In that 03nnestion the use of Vs yard forthwith me very instruotlyo it to sea rIe fir Joint BUDA 71T vast that U at any ti a tip or ralasion eassuataasd a h ditch it had uo force to dont it rould lat p atiataly sail in the auffport efinat attitude on the r ort of erisany of those oh had tile ow merry fovea at voile disloaal4 Tititt MIS tat eitustinn rhioh ooeurred in too Intrwil r of 1431 whoa tas evelaue 4aysnlan3e vsfussti oLivory Goal tatieh was Mtn at the pit he 4 awaiting d brood mat was the position at Us sweat Up Is the quarter ending ixa1y Bist in aortalh ono totes of olive though lass in disoasi in than tit Illitortsges whisk tuid r seriously arisen night sammiad as a dandle Asrinno0 sootiorain spar finanat al nn trebly rove been t t tiro the L militated arninst seal dollvories woro a at so straws as they wort st two dit a iladt if a proposal sad boon natio at the it of July Mass peva mutes lir John AllADDIMIT 4 4 sot Agri rit that Noutine he 115o rale the liasti41 111 IVNOTO nintroversiol felM USA WIMP imovitable but Its ASA eontenti that the Cassissios Alt tests had rightly sr wrongly fo 1 lowed a sonata 42finito polloy with tegastl to Rol delivories pre sAnt g ri00 IAL MN one to rivers Mat poliey he The 0 3Filesina was perfestly sonlatent so to e bet It was impassible for aura such aeWou to be tams brssequily oat without re gerd to p raviolis ue rsauost ands to the i lorusiosinn lsy the reach 116 Ialugation iu 0431UNIAtiatl vti tat Unbar elaliweries we made on the Oxprees dessani of the mash eminent on tie present u rosion the wisest woe sate by the rensh ielogsto in nig ant ammo filar ha stipsun ftvi loom w sot sr awl significsamm etteuld bs attaeheti to this attains s but in eq woe toga etateasate he boon sots entail the Jorailesiet WWI Wan that the policqf tow beiv argot as UM Oustiestas vas the policy of the zmoh lavermrpnt 117 hs pointed out th2t twat was set tla oaly traosima on waleh the rohah oluento was setts is eon ert tn ills Go le simat 7he mob leverammt knit taken its responsibility before the Alia rlenferenue Its Delegate loos nil rosy moinility before the Comission olearly he submittal his da in complete ageolhooat wi tn his lowermost S Anutes No 346a a inewer in conr eotion With the deliveries of tutor and the Under those concition s Oonnissi On had taiten its decision without detraatin in any way from the vi ry 21 ht of Sir John iradoury s ar weest end the strict i t arti itty which insdired him the cJ13eaI81l h had n thin to add He would 1 1 r nk Jir John 31 41 1y for statint that 1 4 would it was not as tit no oustruotion in the why attitude which he would es eot from ir Joan ir dbury or from ny of his oollea ues The OH 11 had 1ways eon struck with the f ee om with which each nierioer of I he c1 Liesion ex ressed his views meth f nd voted cJordin to he ifferenoes the dictates of his own oonscienoe filch were mound to arise in no way of eoted either the inesc of their rol tionshi ls or their s irit of here re7ethed one ueation rid one lone did the deficits in the deliveries of cosi represent e the asenin of volunt ry 17 of nnex IL U DIAL 4AX did not Taloa to speak at lerc tft on a Va ueotion the history of thich had 1e n followed wassesin ly ay the 20 3 iesion o sleech ee aid therefore ffeot his vote es Jince in fuot dive es of view covered r Ai er tee corsider tion of the rexulte r IS cat of the decision to co taken the om desion nek to oest riethod of ensurin more eLisfiostory deliveries corfined bilself to stating that He erkaany ht d not c ti rriea out the ire raiaae of the orn lesion he did not think ar yin as to the for his town cart he thoujit it that there was myth in to extent of the ceftoit use sufiielent to state that for rlinc 0 lone t V Ina es continued oe 321s ale only fact vrorthy of e ktlon was th t jud ent had been even and that if Ilera roy did not aot in aoce d Lnoe therewith the IrsAy enjoined on the Aavaiesion a reference to the overnlents 3 D ILACROlv did not IOU had ever waived this lrovise think that the in the Treaty nor in f ot ooilld it alive done so lie logiOal ednoluAon the re iatts of vhioh clid not require to a considered los that then existed a serious 4 Lef iult 411oh the ermine had not justified save oonsiderations contra ry to the Treaty The latest info rmat ion tve nothin to show that the ernan overn wnt hAd aide the least effort to deserve iny POO Lai indu1 enee should us notife default therefore existed vthlah nu relorted The Ilarguis 44 v GO noted that 11 the sates ak Teek on the Tutorial fRota and the only inutes Wiwates oe 346a 2 321u autos o 346 a a II ralle 346a llo 34 6a ainutos io i46 4521 s the oasis rn Len to could f o rly ierl oxrxs i h f i r duty in the las tter 12G if kir a4lidojr yam acrd to xlroas in a foe words adult oratv bs4 Ladled to do he would 8 4 that any 1 4 tAtioct to tr boo to 000 zoo 0 triordintry r Lend moos ears non by mouth which eary to cola 411 the dif lonitioe tie tho oxporionoe of vovious souths last shown would rise it vas aillierstandaOlo twit i or i ng s a Anion of ner on reluiralexis should of i ot iono attitude fasts Al thlo int were o 1n on on htss Int nd Tier ooth of re t import nod in seediest on with the attest in th at her our000tion it Mad ebony in fiikrnos to er tuky th t the report should f 1 lhasi V ercentq a kWh expressed tale 104 extent Of the Whi Ica t Rie default lobo 1tsiort nt front the huct ex idinda an Anoint Lvint of view as it the roroontago of dirtiest which was woall and t hie seat g had not Si 011ied r000 nI ed as orevbki dradany hod sads u very ooLakderuale offort in a vary ui fflcult 14t1 er nd kaml ett Lned a very lar manatee of ovooeso 127 nithstrto confined kitillNiellt to the olmntary def4ult ln t ias 1 t Of slenally sM 1611 to Iowa leer Oapbillty if howevor reasons which t cal he bore Wan 7 a resort tao welt gat forblior d leuld deal with the 4 aho1e question of the failure of or my in tho ex oution tier unddr the Tniet7 nd ropoid explain t t the eenditione imposed ay he T ro ty do monstrated exo 3rifiese to nd that that if ob Abilitylind affected not only ai radny s financial sitnhtles bad her financial oOli Atiow to tile 11ies out also her ooli Alone line these in rosooct of 00u1 hind 400d Lie would nuethor tine o inion q Op it areid eves mre encemeterteg a iivorolty of Interpretation Rs visual Caroller ref Skutt WIWI 1111111r than s lure And staple settee of the dotietit be AVIS The t lunged 1r John 1 ai4Tfor inxt no obetAeles hi trio way it was Lhoprfore dor sto4d Zh t te Jcia Le on mad uoliftne i t 3e1f larely and aVAlly to 1 rta netteta BILCLULALlwaA 13 Ast A LAtIga atilLAIM dairsiatjaptgL mrkst kWh t tc vi ate oefln oseo at 12s t 8 NOTIFICATION OF GERMANY S DEFAULT AS TO COAL DPMTVERIES Olt letter sent in French to the French Government Belgian Italian in English to the British for information to the United States of America Paris 9th January 1923 THE REPARATION COYITSSION TO THE BRITISH GOVERMENT The separation Commission has the honour to inform the British Government that at its meeting of the 9th January 1923 it decided by a majority the British Delegate recording an adverse vote that there was in the deliveries of coal made to France in 192 a default on the part of G rmany within the meaning of Paragraph 17 of Annex II Part VIII of the Treaty of Versailles In accordance with the terms of paragraph 17 to which reference is made above the Commission has the honour to notify the default thus declared to the Governments concerned The British Government is requested to find herewith enclosed copy of the note of the French Delegation requesting the Commission to find a default on the part of Germany and also a copy of the minutes of the meetings held on the 8th and 9th January at which the German Government was heard on the insufficiency of coal deliveries and at which the Commission decided in the above terms to declare Germany in default signed Louis Barthou Leon Delacroix A LOGAN JR Paris 18 rue de Tilsitt 10 January 1925 Personal a Confidential dear Ben I enclose herev ith coN of the Italian Criticism of British Plan and Additional Proposals dated January 4th 1923 submitted by the Italian Ambassador della Totetta to the meeting of Prime Linisters This is the delayed document referred to in next to last paragraph of page 3 of my letter to you of January 5th 1923 Faithfully yours JAI BD 1 encl The Honorable Benjamin Strong Governor iederal Reserve Bank of New York Nev York City JA E3 A LOC IN Paris 12 January 1923 18 rue de Yilsitt Personal and Confidential Ey dear Ben e are sending herewith first draft copy of Linutes No 346a Exhibit A of the meeting of the AeTaration Commission of January which gives the debate in the Commission preceding the Commission s report to the Allied Powers of Germany s default under Paragraph 17 Annex II Part VIII of the Treaty concerning shortages in deliveries of coal to France during the year l922 letter reporting default herewith Exhibit B On pages 55 60 of Exhibit A will be found certain expressions of personal opinion of Boyden made during the meeting It will be remembered that under the terms of the Treaty and the procedure of the Reparation Commission meetings of the Commission are secret This principle was promptly violated as a more or less garbled account of what 1 r Boyden actually said appeared in the European and American press The French in forcing a report of default based on short deliveries of coal as in the case of the recent report of default on account of short timber deliveries were admittedly considering the technical position hich such report would give them in their proposed occupation of the Ruhr The actual value of shortages in coal deliveries upon which the report of default was based was ro zghly gold marks approximately iik representing tons of coal and 990 564 tons of coke out of a total demand for the same period the calendar year 1922 of tons of coal and tons of coke In other words Germany s shortage was 17 22p of the Commission s demands The Ruhr Occupation On January 10 the French Government issued the text of the notification made to the German Government the same day In regard to the measures which were to come into force on January Un the same day and at the same hour the Belgian Government sent identically the same notification to the German Government The Italian Government did not send any notification The following is a translation of the French notification as published In view of the default declared by the Reparation Commission and committed by Germany in the execution of the programmes of the Aeparation Commission concerning the deliveries of timber and coal to France the French Government acting in accordance with Paragraphs 17 and 18 of Annex 2 Part 8 of the Treaty of Versailles has decided to send into the Auhr a Lission of Control composed of engineers endowed with the necessary powers to supervise the working of the Lohlensyndikat to ensure J A L Or To Governor Strong Personal Confidential Page by means of orders given by its president either to the syndicate or to the German transport services the strict application of the programme fixed by the Reparatidon Commission and to take all measures necessary for the payment of reparations The Italian Government has likewise decided to send Italian engineers to take part in the mission This mission will have powers defined by the two annexed documents which the German Government is requested to bring to the attention of the authorities concerned at the same time giving them the necessary instructions to act in accordance with the directions which they contain The French Government wishes to declare that it has no intention at this moment of carrying out an occupation of a military kind or an occupation of a political character It simply sends into the uhr a mission of engineers and civil officials whose mission is clearly defined The mission is intended to ensure that Germany shall respect her obligations under the Treaty of Versailles The French Government will send into the Ruhr only the troops required to safeguard the mission and to guarantee the execution of its mandate No disturbances and no changes will be introduced into the normal life of the population which will be able to continue working in order and quietness The German Government has the greatest interest in facilitating the work of the mission and the posting of the troops which are necessary to protect it The French GoVernment counts on the good will of the German Government and of the authorities whoever they may be In the event of the operations of the officials of the mission and the placing of the troops which accompany them being hindered or compromised by any action whatever or in the event of tho local authorities by positive action or Iv any neglect causing any disturbance o the material and economic life of the region all copercive measures and sanctions deemed necessary will immediately be taken ANNIa TE In view of the defaults of Germany declared by the Reparation Commission in carrying out the deliveries of timber and coal due under the programmes established by the said Commission and with the object of ensuring in future the strict execution of the clauses of the Treaty of Versailles regarding reparations a Lission of Control of the mines and works of the occupied territories composed of engineers and civil officials is created as from todar The engineers and officials of this mission will have full powers to require all the administrative bodies Chambers of Commerce organizations of employers workmen manufacturers traders etc to furnish all statistical or other information they may think it useful to ask for They will have the right to travel about throughout the occupied territory to enter offices mines works 2 J A L Jr To Governor strong Personal Confidential Page 3 stations etc and to consult all books and statistical documents The personnel of the German administration the representatives ce the industrial and commercial organisations will be required on pain of severe sanctions to place themselves entirely at the disposal of the engineers and officials for the performance of their service and finally to act in accordance with the orders which they will receive from the head of the mission The head of the mission will have the power to prescribe any modifications he may desire in the distribution of fuel or any changes in the destination of wagons or of boats having fuel The engineers and officials of the mission will be the bearers of a special service order delivered by the military authorities which will also serve as a certificate of identity ANNEe T 0 As from January the programmes of distribution of coal and coke established or carried out by the Kohlensyndikat will be submitted for aperoval to the Industrial leiesion of the Ruhr which will be empowered to modify them if it should consider it necessary These programmes must in particular make provision for the complete delivery of the quantities pr scribed for the countries of the Entente and for the occupied territories of the left bank of the Rhine and must satisfy the needs of the territories newly occupied With these reservations nothing is changed in principle in the general distribution of the fuel now in force If infractions of the above directions by the Kohlensynelikat or the miners were declared or if the qualities delivered were unsatisfactory severe sanctions wculd be taken independently of the alterations in the destination of trains or boats which might be ordered be the industrial mission Frequent tests ill be made by the engineers of the mission to ensure that the orders of the Kohlensyndikat have been correctly given and strictly executed On January 9 the Belgian Prime Minister ee Theunis made a statement in the Beleien Parliament in effect as follows To our very great regret I will even say to our deep sorrpw we had to recognise after a profound study that the British plan was inacceptuble for Belgium If we had accepted this plan we could have abandoned for ever any hope of receiving a centime for our pensions reparations and devastations We should have had not a centime to raise our ruins The British elan did not involve a single pledge or a single special guarantee and I think it is useless to insist either on its special dispositions or on the serious modifications the plan made in the Treaty of Versailles Belgium would have had to pay for German coal and coke double their value Belgium was asked to make even heavier sacrifices than the other States She would have been ruined It is with conviction he continued that I say that since the signature of peace the German Government has J A L Jr To Governor Strong Personal Confidential Page 5 The heads of the German States have been convened to meet Friday January to consider the measures to be taken The success of our efforts depends on unity of action The aovernment will unceasingly continue its efforts until the situation is clear At the same time the German President Herr l jbert issuea a oclamation to the German people in substantially the same words as the foregoing communiqu On January French and Belgian troops occupied the Ruhr The afternoon of January 11 Poincare appeared before the French Chamber and later the French Senate to explain the action of the L rovernment At the conclusion of his presentation of the Government s position he received a vote of confidence of 478 to 86 and a majority in the Senate by a show of hands In his speeches he particularly emphasized his thesis that the action of France was not an occupation of the Ruhr stating Our engineers are in Essen our troops camp outside the townr presenting the British proposal as impossible of acceptance by France he nevertheless pointed to the harmony and friendship between France and England stating that the present disagreement based on a difference of opinion was a disagreement of views between friends without other significance With particular reference to the British plan he stated that it asked France to one day risk the chance of receiving 11 billion gold marks for her total share in reparations whereas as a matter of fact she is already liable on this account for CO billion In addition this new reduction under the British proposal very imprudently offers the means for the rapid re establishing of the old industrial and commercial system of Germany The British programme would at an early date reestablish Germany s supremacy over the rest of Europe The only concession which the programme offers us is to propose that we submit the whole question of securities to a consortium of bankers I have no taste for making bankers the arbitrators of the rights of France great applause I am happy to see this demonstration of agreement with ry view Indeed in financial questions we will not confide to international bankers the destinies of our country Referring to the withdrawal of American contingents from Coblenz he said in effect that this should not be considered as a rebuff to France intimating that the withdrawal was merely the culmination of a domestic political campaign in America dating many months back In closing to the surprise even of his opponents 1 Poincar6 evinced some doubt as to whether without British assistance the Ruhr would prove as productive as the French economic experts were led to believe Undoubtedly he declared theseizure of our guarantees ill be less productive but even a small return is better than nothing It may be England is right when she says our policy is wrong We are not infallible but up to the present between Enghnd and France I will not ask you who has been deceived the more often This latter statement in our judgment is a most significant one We have been talking with the Belgians on the Commission ho are very much discouraged in the present situation Real Belgian opinion is entirely opposed to the Poincare ideas and action However with Holland somewhat unfriendly to the North and with the possibility of Prance holding the Rhineland their only hope of gecenting unfavorable economic encirclement is to go with the French for so long as the French and Belgians hold the Rhineland they at least 111111i I J A L Jr To Governor Strong Personal Confidential Page assure for themselves an untrammeled economic outlet to Germany In connection with the present Belgian position it is interesting to report the reactions of the British on the Commission They tell us raw that the Belgians have definitely lined up with the French they have surrendered In the their position of compromisers which they have held since the Armistice past the Belgians have been in an especially strong position due to the absence of an American vote in the Commission They held a position enabling them to intervene and suggest the compromise between the divergent French and British pdints of view which have arisen in the past and incidentally to reap considerable national beneIn the past we have felt that the Belgians have taken too fits from such position In view however of our rupture with much advantage of their special situation the French and the fact that Belgium has definitely lined up with the French their position in the event of a reopening of Franco British negotiations will not carry In they words Belgium is a Small Power and is the same weight as in the past now definitely relegated to the position of a Small Power hile there is some pique behind this British opinion it nevertheless presents some considerations of interest 1 4 Delacroix with whom we have been talking says he is hopeful that how the French occupation of the Ruhr is efait accompli and ith the French questioning its financial benefits France will before long reach a frame of mind desiring conversations with the British Delacroix forecast of events is as He anticipates an early summoning by L Poincare of the Germans to a follows He is fearful that the German He Is not sure the Germans will come meeting policy will be by passive opposition to draw the French and Belgians farther and farther into Germany perhaps necessitating the calling out of additional military Aside from its psychological effect the cost would be considerably in classes excess of any sums realizable from Germany As to this passive opposition Delacroix referred to the striking example by the withdrawal of the Kohlensyndikat from the occupied territor and by the German announcement of a cessation of reparaIn Li Delacroix judgment progress of events tion deliveries to France and Belgium will force the French to calling the British to their assistance in which event according to Li Delacroix the British will be in the position of the arbitrator Optimism is In our view I Delacroix is too optimistic either Delacroix failing or blessing we are not sure which 111 one knows nor can There are too many unknown fadtors Ve feel that it will guess what will happen take h Poincare and the French public some months longer to appreciate the fallacy It then may of their position and to have thepayahological courage to back dawn be too late as in the meantime they will be gradually drawn deeper and deeper into the German mire whether this process of being drawn in will be the design of the German Government or whether it is the normal sequence of events following the In the meantime the Poincar6 policy of coercion is of little practical importance tendency will be for the French to give the maximum publicity lo items on the credit side of their Ruhr ledger and the minimum publicity to items appearing on the debit PoincarOs speech in the Chamber he is However it will be seen from side preparing the French public for some desillusionnement as to the Ruhr occupation being the panacea for all French financial difficulties The Hon Benjamin Strong Governor Federal Reserve Bank http fraser stlouisfed org York City New Federal Reserve Bank of St Louis Faithfully yours ales Translation Bureau ao 6828 AMEX 1731 a REPARATION COI Intelligence Service PaRIS January No To lir ManFs dyean General Secretary of the Reparation Commission R I S Sir As a result of his work with the League of Nations in regard to the revival of Austria I requested my colleague M Pierre QUESNAY to draw up for the Members of the Commission a report on the Treasures adopted with a view to ensuring this revival and th3 results obtained In reply to this request M Oalesnay has just communicated to me the two notes which I enclose herewith The first deals especially with the examination of Austria s fiduciary ciroulatiot the second is a general report on the situation of the country at the beginning of 1923 and on the prospects anticipatod for this your These two notes show to what extent tlw roival of confidence in an improvennnt in the situation of Austria has contributed to facilitate the task of the League of Nations It may even be said that the encouraging results obtained up to the present have been due solely to this renewed confidence I believe that the knowledx of these preliminary results in regard to Austria may be of great us in the examination of the measures adopted with a view to the revival of Germany and to the improvorrnt of her financial situation I should therefore be obliged it you would have I Quesnayla notes reproduced and circulated to those to ahem they mi4y be of interest Signed Eine 1 azurD Maurice FMiE besalstia kreau kALOA 1n4 Po fidid January lb Nov to TIC Iii JAMIATI 5 C U3 I3 I V MPIIIII m The ireneh and deliginn aelogutIono have the honour to lay War the Coossisoida ter imadiato oorsider lien the folio it fuotss in Airman the Presets abti Belgian tho to rm n Government of the measures vhich thoy Governments notifio interddo4 taking in Coy sequence of tho nctleo given by the Toper Atlas comedgaloa under pl reepaph 17 or Annex If to fart Vill of the Treaty of Versilles of Gorampros agoAllat in the perform roe of the deliveries of sots and Mai deliveries of wood in its reply to bozo notifications 4A30411 Jamaary 19 09 the Gorman Government doo1or 1 thrita 54 long us this broseh of the grotty due to the violent stature of the centre of dermas OCOTIONSIC life outlives Vs yraetioLl eonsequenses are not uvertod dermal is not in u position to mAge deliveries to the ere rospensibls fur this state of affairs 1 14L 2be dermAn Govern lc Ael4r tiort GonnileeIon by civenoles Ott ah r Is t notified the said re ly to tin letter dated Jeruary 1Z In an ofTleiJa stAement publIshk the by tho revs fp Await 11540 the Aeichsicohlenkomnisaar annobnced that Wale Hsieh 11111 not sifts spy further pimento in imps poet of ocv 1 delivered to OPMADO sad Belgium under the laylaiihm lion nammisata clauses nor ph the Snots of traturting nosh fuel by rail or waterway AS no course of a meeting held at Set en Os Jnstusry under the ChnirmaNship of 4 CikT Chief of the Issiun of control Aar VAMLN perking on beh4lf of the misiownerue confirmed the fact that the managers of the mines had received from the vier n uvtrutilent the follCuine eommunieaties4 Fr Ansa and Selena Waft oseried out nilitury v nion of unoccupied territory SernOmy is no longer in a pus nor to supply itspelration Goole ia ate nich i 11 not m s r ny Iurther p4pmente in roe peel of eon delivered to these countries under the Aeparatien clauses nor ray Om costs of trvnuporting such fuel by rail or vaterwuy 2he fact is eonfirmed hy 4 telegro from the bureatt of the epnve tion Gomniseion 41 eseen relived on oftmdary U at Nu ii loo delivery of Aev r nun coel Irle sage ea Jammary tok Or ing to the latest infarmatiun received th deliveries were not resumed out the loth 4 as toolephone on January lb at 1000 as Michas The Berman Livestock Coorlisslos has officially irlonsei the frernh and belgi4n Livestock ervioss hot 11 deliveries both reparation cad reiNtitution will be stuipended im ediately mei that the trtits ready fur Jes atableill not loeve 1 Is SOrmsaishStan has been mews to the ltslian Livestoin service No 681A b A Annex 1734 ly a letter addressied to the trench and Deletion Wortrioes the 3elohsksmetisear hos officially annoimo0d throt vepurIttiOn 418 liveries will be suspended IA once 0 ocamumicc4tion hrs teen er de to the Italian hereto Z No coscaunicktton hash bstn mud by tin der iun authorities in regard to restitution deliveries othe r that livostesk4 ard up to the present there has 1046 na it such deliveries It K has 10 Iellerotuted hemmer that the German that an etiderior the suspen sion of doliveritJAI Via bolos prepored4 Irfonmtion rcceived from ctber seeress by thc French Delegetios Awe tint as early as JiArtaar7 14 a 43t14 train which VUS reeky be leave was stopred by the german authorities lies moo pplies to firs n wont hming 44 horses destine for Belgium which vas to Leave Larovrr ou oguuary 12 The French and AtilgiAt Delegations are of opinion 0114 those fasts 81148118t 4 default by 4ermomy within the smening of 11 racrlIph 17 of Annex II to VIII of the TreAty of Yersz Alies neiooet the Ati ar4ItIolt Uommls 1 41 tomediateky to declarep three defaults tvd to civet nutice th 3 iisdiately to ilk Uovernments concerned L Iffileds January Dear Colonel organ noverncr Strong in his letter to you of January 8 did not alke Dention of the letters you sent him u Ver dates of November 24 P7 and 28 and those o7 Decemner 1 snd 8 I am sorry to say that this oversight was entirely my fault as I failed to lace these letters before bin for attention at the time he answered the oth re They will however be ersonally aclnowledzed on his return from Washington I trust you will pardon my oversight and hope that it has in no way caused you any inconvenience Yours very truly Secretary to Governor St rong Colonel James A Logan Jr 18 rue de Tileitt Paris France G 11646 ONMX 175a a T tafiLATIA atlitkakil No 62476 AI U zTi 4 YnR 153Is ti MIAL January t 1714 To the it i it 1 011 GOAA3 61411 On Jimmy lu 114 tbo FronAk oat Deleon uovcrnmerts sent to the Unman Government identical notifiw tions concerning action to be t 4cen in the b sin of t tt 12hr In the mePntime this action has been lauxicheu Zhe German Govvrnmert has the hono tr to comnUrioalte to the feparation cenmission the trove montiona uotifications 1 together with the replies just sent L irned 1 4nnexes 1ij4 biev 41 2 Annexes 17 the oerman Uovernmunt V 411 COPY Green Paris listed Jan Rood 9 53 A Jan 16th Secretary of State 7ashing ton 25 January 15 8 p m B4130 iscellaneous reparation receipts January let to 15th Luxemburg coal 3 545 pounds dyestuffs 1 260 credit Belcium roceeds British reparation recovery aot DeoeJber 606 000 pounds retained Great Britain under larch 11 agreement ends the army costs ITERT PAL Boyden r wia A tox ocanassios oretariat Goner e 1 aril 16 1 kiszary ho Liemoral eorotary Asp twat ion onsli 0 ion To the unorfloiLl Del ate for the L421 I tod Aates of zisri bet to tre1 1 3nit herewith for the infor 3ttion of your 4 rvs noont copy of a letter 443 th haz beeln aldressed this drat to the noh Britt itz litst n LoI4ttn keeisrugents s1 nattaro Mk 11a sa Assistant Generkl 3oorotury Letttir a nt th r rehohs toto dr nob Belgian and Italia for vern i 11 shs i re ti sh Uombrzclent said Goments to U i hoffiolki Delegate inlbmation ii January 1911 irons ion The i OOiti1 d 011 he brit ish Goverment ei rat ion Gansu as ion has tlx hosour to Infonst tho British av erment that at the mooting held today tho 16th sh nuary 19 3 it r ol ted t to follow isw decision by three votes the brit ish Delegate abstaining January there hns been 7X dal ivory of reparation 1 ooalg ieis4konLatear ht s offielaUy announcted by letters addressed 2 t ems that mparation deliveries would be suspendto the drench sod lgit n ed at oz s ranch r nd 3 the 4ornan Livestook Cernsiesion has offieially informed t 11611 ikin mites that L 11 6 I ivories on reparation and restitution ao oust would be t1 f ended that the treins ready for despat ch wage not leaVes and that in elites 34imiary 12 toe trains of cattle Jed horses hulls be stopped by the f esr e authorities lel borate putting into this sitaations rises from the voluntary afoot of a notification raid on wary 1 by the ersan Governeent to the the terms of 7iiinh hive WS ansnmi rztei by the ire nth and IdIgian iovo demean dowanaseat to the iepttration Come salons 111741F s13 t velu7 t ury nets ret of this 6123 MS Ion of the perfc raLnoe of roper Lion tau rectitution obligations referred to in tilt Treaty is this olearly established vittiout its being necessary to aft tile L terman Oreve rr men t to Rive further rho ilk COMILL8 2ILa 7 is sins taw y 13 bit in the del i Tarte due to a r an ce ztnd iseleium o f Uor nrti rrj w i thin the met fling Of rag sph trier are tiro def ul Li on th a 0 17 of ktulen 11 to art VIII cf the Treaty of Versailles in rettroot of coat tad livestock to be livered on rtparatIon as ell s on restitution Actuount Inc tt3oora G3 with the terns of primer h 17 to which reference 13 made ebove the Connission N 8 the honour to not ify the def Alto Vire de clared to the levermeLt 9 t ortserned if ad Louis blitT11011 ASGOI po I Letro enro me uvorneman t fr Lrua is t i t Lien e tee ouverneaent t co pie our information en an ale jue lei aux des tots Units le 16 howler 192j karAitaTIONia 14 tX nv OUVI PLE 4 31S 414 tions i hon eur de Cairo eonlaitre aau owi rueIstIon des swat osi Etutau Gourd de sa se noe tenue au jourd hui 16 Jawrier alio a ris sio Jaten Ant do voter la decision 01 41 1r reiti lue par traits ioix fUltilt Ita l i DSO is co n sid er Lnt 1 o ue de Ads le 13 Lawlor cour Int auoune ti r iaoss du da Arbon de re aration oto effect ass xtr lettre AdrOdSefi kt itte Le eichairon ia er a fat con aitre erstioes trandale et cal quo 4 0s livraisons all titre de reoaration earAent arrotee im edi almost I la corn llamado our la eLo tel a ottioiellemont al ni to 44 erlices franoais et ael e 4u touts livraisons tent reaaration itao ratitution seraient arreteee us los trains erste a etre o ies no partirgient et qu offectivax nt doe is It shavier deux tra Ins do Jetail it de ell 1 Lux lez utoritee ailemendost ont ate arrotes 30 oons I de rank Liu cot eta t de hoses est a suite donnee Yolontairclent et de irupos deli4ere is cieferli ent allenUnd wax Ouvernea lane notifleAtion i ite le 1 2 invier merits fr nelis et uel e notifie tien Mont Les terms ont ate sr le client 4 LiemArid 00r K 10 0T1 1108 i 11 COW a ratious euvorue ons ids F7 11t ioe la orm et Jra folont Ire de eette sue eneion do i exe lection des deli Atione est ainSi INIttyrnent taude re rations 04 do restitution prevints 3ar is nt ft ns kill lel 801t Je ioin de de sander au euvernietent allotment dos wale dons aeaten 7 1res Deeide ns Lee ii7F 400ill a taus a la r Lrae et a depute le 13 danvier deux lanitiosnts do l ollookose au Liens du 4ar 17 do 1 nnexe II a Partie 1 1 du Trutt do Versaillis 3ettquetients oOndern zit roe seotivoilent slain ealui des restitulee oharoone at to Jet Ai taut an titre des re tions u91 1 onibIllinent Aux teriaos du P r L7 ai deezue cite la 4N0trais ion a I bonne 1 r de noting is es n4uoaorsto ainsi etinstf tse aux ouvernesente Interessose 4 net Auls i ial DU l CONFIDENTIAL My dear January Logie Your last letter of January 5 is before me ae I write but I have not yet finished reading the enclosures which accompanied it They are all mighty interesting and instructive Just now I shall not corm ant on what you have written me in fact any coile ent from this side gets a bit out of date because of the rapidly changing con2itione but I want to write you a little bit of what is going on over here First let me say that I think Basil s views as expressed in a letter that he has just sent me that France is liable to suffer some injustice in public opinion of the world and of this country by her policy in the Ruhr has a good deal of foundation The revulsion of feeling over herb has been very strong Consideration for the real difficulties of the i rench and for our tradition of friendship with France is serving to restrain ublic expression of feeling entertained oy a great many influential people that the French have made a serious blunder I would not if I were you incline to the view that seems to be expressed in the dispatches from newspaper correspondents broad teat the public reaction to the French policy hex not been as severe in condemnation as they themselves exnected I think the fact is that in this ountry it is much sore severe than has been publicly expressed It is a little bit like the restraint that one feels in criticizing a son or daughter or wife when the father has just died shat feeling of co Isideration for France is very deeply felt here but on the other hand private expressions of views about the present French policy expresses it as little less than suicidal I have been trying to make up my mind as to just what is likely to develop as the result of the occupation of the ahht and even a possible extension of the policy of internal control of German affairs by the French Any view just now can be little more than surmise until the picture develops a little further But I am very much impressed by one of the immediate developments which goes somewhat to confirm the impression that I formed when your earlier letters came disclosing the possibility of the occupation of the Buhr Germany can only pay reparations as the result of the efforts of a hard working population to produce the means of payment The government debt depreciated currency inflated domestic prices and disordered foreign exchanges are of less importance than this great question of production y first thought when Boner Law announced his policy of tranquillity and when the French indicated the possibility of independent action was that it would mean a complete conversion of the mental attitude of the German population from tht inspired by some incentive to work and pay reparations to one of sullen indifference resentment complete lack of incentive and a general let down of morale So far as the reports now received contain anything on that suoject it certainly looks as though the immediate reaction is exactly that I do not take much Colonel James A Logan Jr January le stock in the talk that it will be an expensive military enterprise for the Probably it will cost little more to beard an army in Germany than it French The transporting of troops and does in France possibly not as much supplies would be the principal cost of military occupation over what France ie The real cost will ne in the now spending on her military establishment changed attitude of the Germans So does it not all boil down to a judgment of what the French are after 1 they are after reparation income this will greatly lessen their chance of getting it If they wish to exercise a complete domination of Germany prevent her recovery from the effects of the war destroy the possibility of Germany becoming a menace to the French either in an economic sense or in a military way 1 presume that at least provisionally would appear to be possible oy this position On the whole I should be inclined to the view that the French are more governed by their fears than by their intellect lee are awaiting with the keenest interest to see what unfolds in Germany but I can see mighty little hope of anything good coring of this eove Our English friends are working away with the Funding Commission but so far as I have any information which is very slight indeed I do not believe that they have yet arrived at a formula which meets our public opinion on the one hand and their financial necessities on the other hand There is an excellent foundation for a reasonable bargain and one which Congress will ratify but there hay be of course difference of view between their people and ours as to what is reasonable I think one thing is certain however and that is that no plan of ihayment that comes within the limitations of the funding bill is feasible or is regarded by their side as being feasible The favorable eircumetancee are in a word the following 1 The payment of 100 million dollars by the British has been convincing evidence to the country and to Congress that the British intend to pay 2 Strong fears which have developed in the middle rest that if we are not easy with our debtors we nay lose our markets for the surplus farm production of the country has reacted upon Senators and Congressmen from that part of the country so that men like Borah and Capper are openly advocating leniency and a modification of the terms of the funding bill 3 The French occupation of Germany has rather elevated public opinion ae to the 3ritish to the extent that it has depressed public opinion as to the French Finally with this background it will be difficult to see how Congress could decline an offer of a settlerent which contemplated full payment although the terms of i ayment eight involve a temporary or eermanent reduction of the interest rate and the distribution of the amortisation over a much longer period than 25 years What will be produced of the negotiations it is impossible to say although I understand that to day they are eetting right down to brass tacks There is no doubt that the President s ship subsidy bill was shelved The next item on the program of legislation in the Senate is some agricultural credit scheme of which two or three are now being debated Following that must necessarily come action upon the British proposal if one is made The Colonel James A Logan Jr January supply bills still have to be voted so that there does not seem to be such ohanee for a very large output of le7islation at this session and nobody wants to Be the new Congress called into special session except the more radical members who have just been elected Business conditions are pretty good There is very little unemployment in the country wages are high prices of farm products are rising and on the whole I should say we have a great deal to be thankful for and eighty little cause for discontent It looks as though Mac were a fixture in the Phili ines for the moment now that General Wood has finally decided not to accept the Presidency of the University of Pennsylvania and to remain in the Philippines I hear that Mac is doing a great job out there as we of course all knew that he would A great deal of interest has been aroused here by ioy len s statement before the Reparations Commission in connection with the German default It has especially centered around the suggestion which way widely uoted that the reparations provisions of the Treaty of Versailles are unworkable I have no doubt that the newspaper accounts of what he stated before is written statement appeared were considerably exaggerated The memorandum in regard to hoover s Toledo speech I have read with the keenest interest My feeling hes been the ilocver sometimes oases public statements upon information furnished him oy people who are not making as thorough studies of the subject as they should he has recently been quoted on the subject of possible exports of gold from this country in a way thet I know was misleading then I saw hi it V r ehingtor last week I asked him to eeplain the ground for his statement and found that it was pretty sketchy Our best opinion here at the bank is that notwithstanding the trend of our trade which is roughly speaking enlarged imports and the probability of some reduction in exports will not be sufficient to overcome the progressive exchange depreciations which are to be expected still in certain quarters that any old which we right send to Scandinavia Switzerland Holland Japan Canada or even India would be Rear a very small percentage of our huge excess supply The eeserve hanks alone hold 1 1 2 billion dollars of gold in excess of their minimux reserve requirements No such revolutionary change in the world b trade is liaele to take place under present conditions Please do not get discouraged in writing me if you do Lot always beer from we regularly or the last few weeks I have had a combination of trips out of town and a bad cold that laid me up part of the time in 6eshington and part of the tire in riew York My best te you Boyden and 3aeil Yours sincerely Colonel James A Logan Jr 18 rue de rilsitt Faris France c January rtte 7 as you know I have alauys bee n against the occupation of the Ruhr or any other measure of coercion that woul d be brought into operation before the total liabilities of Germany were fixed I have always thought that energy is to be sholvi after reason and not before But we art now aced with the fait accomoli and as a Frenchman I feel it m duty to do everything I can to help the French Government to make the best it can out o f the present si tuai ion The Ruhr as a gage productif is to aror mind not destined to be a success le will by and by be induced to exploit the Ruhr resources ourselves which is a very bad method indeed If a man wants to force his debtor to pay the usual course is to threaten him with legal proceedings and not to ta Jce over his business and look after it in lieu cf the debtor The same applies to countries By trying to administer private business in the Ruhr V shall be involved in enT ess difficulties especially as regards the foreign markets We may p erhap s be forced further into Germany and nobody can foresee what the conscauences may be I don t wish to act like Sir John Bradbury and start playing Cassandra I don t wish to predict catastrophes like the author of the Apocalypse I erill only say that for the reasons ferpleined abo e I don t think the Ruhr as n gage produotif will be a resource producing process 1 On the other hand to occupy the Ruhr as a sanction is probably one of the most effective measures that can lo taken it is true I think that the Ruhr could no t produce wealth for u s but in hold in the Ruhr we can prevent wealth from going into Germarg The idea of sanction first presupposes the idea of an alternative to the sanction in other wardn of a proem I me It is therefore more necessary than e ver to see whether a programme can in the present circumstances be estatlished by common Ea reement between all theA3 3lee and Gertraay s debt definitely fixed Let us consider therefore what progress has hem made in that direction since the Conference of Jamary 1st non ar Law s scheme wea I think inacceetable in its political part and the reparation scheme of its financial part But the German debt scheme of it financial part is I think quite workable except for the length of the moratorium which appears exaggerated present value of the German debt coaterplated can not be fixed accurately because of the various terms of discount It has been pointed out that th present value could be awthinc between S milliards and 50 milliards bet in order to accept either of tho 9 two extreme f i Tures one would have to accep t absurd hypothe ses to make it 27 milliards one would have to suppose that Germanv although able to redeem the whole of the first series Bonds within a year would be considered enable to i ssue the second series t1 at i obv ion sly absurd 1 The Vre ach Government has announced that 6 000 tons of coal have been sent to manse in a thy It eruct be remambeeed that 6 000 tons per diem represent 180 000 tons a month i e about 1 7 of what Germany has been delivering up to tne pre a alt 2 In order to make it 50 milliards on the other hand one would have to suppose tnat Germarg although able to pay the interest on both series of bonds would be unable within a period of 3 years to redeem even one CO 1 d mark out of the first serlee and that is equally absurd I therefore think it fair to accept Sir John I3radbury s own suggestion that the present value is something near 37 milliards ile w let u 3 consider what the mieineue demand o f France i s accord ing to M Poincare s own plan This plan stated that France could not can sent to any reduction on her share o f the A and B beads of the Schedule of Payments i e 52j of 50 milliards milliards lf we deduct these 26 milliards from the 37 milliards there remain see roxieately 11 milliards to satisfy the demends of Great Britein Italy and Belgium Great Britain since the Balfour Note intends to recover from France or Ger many the am ivies which she would have to pay to emerive The debt of Great Britain as it ct sood on the first of January was 1 milliards gold marks approximately It is clear therefore that no acceptable scheme of reparation was po ssible a s long a s G 32cat Britain wanted to recover 17 milliards a rel only 11 were available for Great britain Italy and Belgium But m nave now heard by the newspapers that the United States were ready to contemplate an abaterert of the in elrests on the British debt to something like 3 or The normal interest of mane or the open reareet being now el Tree irately 6 or iti it is obvious that the suggestion made by M Baldwin represents MD 7J9 or less a redaction by half of the Briti sh debt Let us assume that the United Stetee understanding their onn I ate est in a businesslike manner would apinly consent to a reduction of 50 on the British debt on the understanding that the payment of the 50 o would he eeriously underteken and not simply recogaieed in more or less solemn Parliament speeches The British debt to me rica wciald thus be educed to 17 milliards 8 1 2 mil liards 2 Great Britain 119 S aireeety received 1 1 2 milliards of French gold Great Britain therefore would only be entitled to e et oven under the Balfour note 7 milliards either from Prance of from Germany If me deduct those 7 milliards from the would be as we have reen available on the 37 after Prance has teken her 26 milliard c e find that there would be left only 4 milliards for Italy and Bele ium which is obviously inseffioient The share o f Ita2 and Belgium accoreing tb the Spa pereentrce on the A and B bonds of the old Schedul e of Payments would be 18e3 on 50 iarde 9 mir lards de are therefore faced with a deficit eeua 1 to the difference between 9 and 4 milliards milliards It seams to we obvious that with a little good v 1 13 on the pert of Frenoe Great Britain Italy and relgium such an ameunt nonip sr atively ktma 11 oufeht not to provent a general agreement being reaohed If such an as reement vis reached tae Prenoh Governu nt instead of working on the deceitful theory of the gage productif could say to Germany I am occupying tiu Ruhr here are your liabilities definitely fixed to an ampunt which you can effectively pay If you fulfil your obligation the occ ation will only be theoretical and will be rogressively reduced instead of extended If on the other hand you do not fulfil your obligations we can it the whalL of your economic life by isolating from the rest of Germany one of its most vital districts 0 Green J8 1 aris Dated January itecd 5 28 p m Jecretary of 3tats Washinuton D January 22 5 p m B 840 4iscellaneous reparation receipts January 16th to 20th Luxemburg coal 6013 pounds credit Belgium DX Boyden AP 1ES A LOGAN J R Faris 19 January rue de ilxitt Personal and Confidential i y dear Len re enclose as ixhibit A letter of January addressed by the German representative Herr A sher to the Ree arati on omission This letter enclosed copies of the formal no tifications dated January received by the German Government from the wench and Belgian Goveennents concerning the proposed action in the Ruhr Basin The text of the notifications of ranee and nelgiure as tarn from the cress at the tiers and in substantially the sane words v s renorted in our letter of January Kerr eisher s letter to the Commission Jr also encloses copies of the Terrrad Government s replies dated January 12 to the French and Belgian notifications of anua r 10 position It will De noted that the replies recite the of there being no legal justification for the action tafeen in the Ruhr Basin which according to the German contention is a violation of international law as well as a violation of the Treaty of Versailles It will be also noted the Germans claim According to the e 4 ress statements of the Reparation Commission in its I ote of Larch default in the case of timber and coal deliveries could only be punished by a demand for cash payments so that further measures under paragraphs 17 and 18 are in this case excluded 11 von the regular application of p araLp al h s 17 nd 18 should entail only economic rand financial measures or measures sireilar in kind and ie portance areainst GerLan y These could only be measures carried out by the Allies in territory where they are supreme ar not measures which like z the present entry of troops and officials into the Ruhr Basin constitute the most serious violation possible of German sovereienty e inally under the Treaty any measures nermissible against tier any can only be taivan by all the Allied Powers conPowe s acting cerrad in reparation together and not by it alone It is in vain that the i rench eovernment endea ors to conceal the avity of this breach of the Treaty by describing strength fact that an arrqyr at its action as peaceful of unoccupied and with war equpment is crossing the frontier Ter alia territory shows clearly that the French action is military nce The situation is in no way altered by the statement that politics1 nature has no military operations or occupation of a in view moreover this 8f ter neat is no t final but is only made for the time be ink The flo J A L Jr To Govermr Stone Perserial and Confidential Page The Lierean Government notes that the only real reaeon for this breach of the Treaty alleged by Feance is the fact that Gerraany has fallen short to a relatively all extent in the deliveries of timber and coal re cuirad for 1922 biter the immense deliveries made by Lierenny for four years in fulfilment of the Armistice and of the Treaty of Versailles ith the reatest effort and to each an extent that her power of pro duction are exheusted these paltry arrears suffice to enable the i rench Governnent to enter German territory in peat military strength and to lay hands on the most important of Cermany s economic possessions The i erinan Government foriael ly protests before the w hole the violence here done to a defensaless nation it can no t defend itself against this violence Nevertheless it will not subnit to the breach of the Treaty nor assist in the execution of the trench plan as it is expected to do It repudiates this sueeeeetion The responsibility world ac2ain 3t for all cense uences falls on those Governaents alone who have carried out this march into Germany These cense uences can already be seen in a further depreciation of the reark and a sudden rise of all prices in Gereary the futuee econocic end cuaeee aee es can not be foreseen As long as this breach of the Treaty due to the violent seieure of the eel ter of eeraan economic life ceetinues are itc aractical consequences are not averted Ger x 1u is not in t ears sea ea Tele for thie dcliv ea tThe same text aas eneedoyed in the Gera n reply to the Bele ian Governnt underlininz of the last sentence is made by us to enphasize the practical feature of the German reply In accord rice with the last sentence of the forecoing the German Goverment issued instructions suependine all deliveries in kind and all deliveries under the several substitution Restitution lereements to Belieium and France Aiaparently however they have continued to date to effect deliveries of coal to Italy on reparation accouet No Substitution Restitution vent has been negotiated as yet between Gereary end Italy Before the arrival of the T ench and Bcleian Ids dons of En ineers with their sweort Frenc o Belei an military c ant in Tents in the ILahr Basin the German Ruhr Kohlensynclikat hureiedly removed all their administrative and technical personnel and records freer Essen to Harnbur P where a new headquarters for the Kohl ensyndikat was estab li shed eimultaneouely a nno tricement T s nnde o f t he resignation of Herr Lubsen as Director of the Kohlensyndikat Herr Lubsen while not the only Kohlensyndika t Director was nevertheless the effective and actual German representative charged wi th e ffect ing rap aration coal deliveries It is assumed that his resignations was part of the German tactics for impedin g fur ther reparation coal deliveries for tactically at least the resignation places him beyond call of the Franco Belgian authorities ide are also informed that all J A L Jr To Governor Strong Persona and Confidential Page 6 de are informed that the forrz ning 3arthou plan has met with the general pproval o f the french Government and that it will be presented to the Commission at the appropriate time Disrec arding t ese strings as to general approval and appropriate time it is interest ing to reflect that had such a basis of discussion been presented by the french last Lay during the Bankers i leetings or even last summer these is every reason to bc1 ieve that the reparation 4usstion would he been a settled issue by this time however there appears little chance for its practical success Today The wench rEiy or may not submit a plan on the foregoing lines to They may do so for the purpose of showing how reasonable their demands actually are Cur present judo nent is that such a plan will not be submitted in view of the present attitude of Germany and tlat it will be withheld the Commission until this attitude has changed nleeting of the reparation Commission was hurriedly called January on the joint re2uest of the 2rench and 3e1 0 ians for the purpose of for sally re oorting a default to the Jailed Governments under Par 17 annex II Part VIII of the Treaty concerning Gerramy s failure to effect deliveries of coal and livestock to i rance and Belgium and on the official announoemtnt of the German Governnent that reparation deliveries ere su incnded The Briti sh interests Koaball Cook Eir John Bradbury were represented by the Assistant Delegate being ill The proceedins s were pro forma Very little said or to be said in view of the 2ranco Belian Italian bloc L report of default was made by a majority of three votes the British Assistant Delegate abstaining Cony of the The Commission decided that no formal report of default herewith as Exhibit hearing of the Germans was necessary by reason of the definite German statement of suspension of deliveries in kind In connection with the reports of default recently made by the Commission it is interesting to note that the fundamental legal question involved concerning the frairico Belgian action in the Ruhr has not been mentioned Germany s suspension of deliveries in kind is largely based on the legal theory that the Allies have no right to act separately in the application of sanctions nor to take military action and that therefore the action taken in the Ruhr constitutes a breach of the Treaty whidi justifies Germany in its refusal This legal question depends on an interpretation of Par 18 Annex II Part VIII of the Treaty of Versailles which the Commission has power to interpret but only by unanimous vote The ouestion nas never been thoroughly discussed in the Commission though the British view apparently supports the Germin contention 7e would not venture to express a Ty definite opinion in this letter on this cuestion without hearing a rgur ents but our present impression is that the EnElish and German interpretation is wrong ss regarda the future The Frernh are hopeful that their policy will force a change in the Gera n attitude and that the Curio Goverment which has taken such a definite position will fall and be succeeded by one more conciliatory are convinced that Prance having started As stated in our previous letter be drawn deeper and deeper into the German mire on the Ruhr policy 13 bound to with results that can not be foreseen In our jud ment rance can bring iermany to heel by coal starvation IT o one can guess what Prance will get out of the J A L Jr Tor Governor Straag Personal and Confidential Page 7 uhr whatever she i ets will be regarded and proclaimed as a victory for her policy Even thou h she gets a little now in our view it is unimportait as it can only be obtained at the expense of the future In other words and under present ccrucii tions what France today can get from Germany through her Ruhr policy is at the expense of Ge rany s capital account and not her income account uch expense will not be only at the cost of France and the allies entitled to reparations but also to the whole do rl s LIconomy de feel that vine t her France jets anything or not she will stay in the Buhr rauu lly beinL7 drawn in further and further and never finding the exact excuse necessary to enable her to step out gracefully The only thing that JR can see at the noment thich will force k rance out is a serious collapse of the rant with its resultinP effect on French taxation giving reasonable French opinion a chance to assert itself and throw out the Government Faithfully yours d LL AJJ Enclz 2 The Honorable Benjamin tronL 7 Governor Federal deserve Dank of i ew York 1 ew York City JAMES A LOGAN Ja iris 26 January rue le Y ilsitt Personal w Confidential L7 dear Ben On Page 4 of our letter of January we referred to the draft French proposal for the Reparation Program for 1923 which up until January 13 L Barthou had proposed submitting to also referred to the fact that at the request of the Commission Poincare this proposal was withheld id then gave a resume of the Barthou proposal which while impracticable under present circumstances This draft nevertheless constituted a fairly moderate demand on Germany proposal had been prepared by the French Delegation on the Retaration Commission under the direction of L Barthou It appears however Poincare s definite objections it was withdrawn that meeting On January L Barthou informally transmitted to the various Delegations of the reparation Coission the French proposals for separation Program for the calendar years 1923 and 1924 The proposal was not at this time officially filed with the Secretariat of the Commission A summary of this proposal is attached hereto as Exhibit A and includes 1 Proposed decision by the Commission 2 A proposed letter to be sent b2 the Commission to the German Chancellor and 3 A plan of financial reorganization A complete English translation of the forefr ding will follow later Daring the afternoon of January 25 Barthou officially filed the fogegoing proposal with the oecretariat of the heparation Commission together with a Note kxhibit B containing certain minor amendments having the effect simply of Lotting the I s and crossing the T s in the original proposal and requested that the whole be considered by the Reparation Commission at its meeting on Friday afternoon January 26 All were greatly surprised by this most precipitate French action c are informed that the Belgians and Italians had no knowledge of the contents of the French proposal until its informal receipt from L Barthou on January The Belgians and Italians whom it is supposed are supporting the French thesis against the British were therefore placed in a somewhat embarrassing position not having had time to effectually J A L Jr To Governor Strong Personal Confidential Page consult their Governments on the pcsition they should take in the presence They therefore vigorously protested of this very radical French proposal with the result that late last evening the French proposal was withdrawn from the secretariat and replaced by a joint Franco Belgian note to the Commission asking the latter to record a general report of default as per Exhibit C This will undoubtedly be adopted at this afternoon s meeting of the Commission by the votes of the French Italians and Belgians voting for with the British abstaining An examination of the French proposal shows a most revolutionary departure from past theses of handling the reparation question It is visionary and impracticable in the extreme In fact if it were accepted and if it could be put into effect it would go far in actually making the reparation Commission and the latter s Committee of Guarantees the real Government of Germany It would involve outside complications of the most serious nature Our own interests would be affected not only from the standpoint of its further wrecking the World s economic fibre and our commerce but our corporate interests engaged directly or indirectly in business in Germany would find themselves in exactly the same position as the German industrial so far as relates to the seizure of their values The whole plan in our judgment is sheer nonsense In view of the foregoing we were constrained to believe that the proposal had been resented from political motives rather than from economic or financial ones The Sritish confidentially tell us that it was submitted for the purpose of blackmailing the British Government into support of the French G verment that the French Government now realize that the nuhr venture is unsucceseul and even dangerous and that before long this fact 7 111 come home to the French people The British hold that the underlying motive of the French in submitting this proposal which seriously affects British interests was designed to smoke the British mil from their present position of semi isolation The British also claim that the drench were acted by the hope of somewhat similar results from our own Government i e enclose herewith as uxhibit J copy of a letter which was confidentially handed us by a French official and one who exercises a certain influence in the press It is interesting as representative of more intelligent thought in France e recently lunched informally with L Loucheur and v e feel that what he said will be of interest to you Loucheur as is well known is an aspirant for the toga no worn by a oincare and on this account his appreciation of L Poincar6 is warped Li Loucheur said that French public opinion today was uninstructed in the realities of the present French policy but in the mas and for the present supported the Poincare thesis On the other hand he said that an overwhelming majority in both the Chamber and Senate was opposed to a Poincare but could not act in view of public opinion He said It is well known that I am against I Poincare but even I was forced to give my vote to L Poincare in the recent vote of confidence in the French Parliament He said that the Ruhr Occupation could not possibly give any results and that some graceful way must be found to get the French out of their present predicament and before any further damage is J A L Jr To LI overnor jtrong Personal w Confidential Page The only hope that he saw was to join with the British at the earliest possible moment in working out a joint solution He said that n this end could not be carried out in the open in view of French public opinion He also said that the services of outside bankers and experts would be required in the seal ch for a solution French public opinion however would be antagonistic to any public calling of a Committee of Bankers or an Economic Conference In LI Loucheur s judgment the way of approaching a solution would be for the French Government to confidentially open negotiations with the British through the medium of some trusted French agent In the course of the negotiations the banking world and the outside economic experts could be confidentia112 approached for their assistance and advice Under L Loucheur s scheme a plan could be worked up quietly and when finally announced it would be in such shape that public opinion would accept it gracefully and with relief on the general basis of its constituting a victory for French policy in forcing Franco British unity of action Loucheur said he had proposed this line of action to Poincare and the latter was considering it LI Loucheur expressed every doubt as to whether the British in view of the position that 11r Bonar Law has taken would agree to any such conversations so long as the Poincare administration remained in office Now we don t attach undue importance to the foregoing but it nevertheless presents an interesting line of thought particularly as coming from one so prominent in French political and business life done In our judgment the British all along have been overconfident of an early change in French attitude Now that the French have started to commit hart kari we don t see how they can stop long enough for breath to do anything sensible In our judgment the best possibility lies in a change of Government Whether the period which will elapse before such change is to be measured by weeks or by months is a question on which we would not care to express an opinion Public attention is now getting concentrated on whether or not the Germans are going to lie down We feel this is relatively unimportant We expect that the Germans will have to lie down because the French will have to make them but whether they lie down or not the harm has been done When you consider that the fundamental requisits in restoration of confidence it goes without saying that you see no progress as yet towards this fundamental no matter what may be the result in Germany in the next few weeks Faithfully yours tz JAL BD 4 encls The Honorable Benjamin Strong Governor Federal reserve Bank of New York New York City Etats Unis d Ameri que Jab Ixhitit jE nul 17 O 3UMMART OP IIIRRCR PROPOSAL PIP RVATUTTON 13 177AI 73P The 7reneh proposal Includes I A draft decision for the Reptiration Commission II A draft letter from the neparation Coalission to the Urban Chancellor III A draft 7 1an for lerman financial reori LnisrAion to Oe enclosed with the letter to the werman Chancellor II I TH TT1FT A Th Commissin acting under Articles Let 2C1 and Annex TI art VITT of the Treiity of Versailles in view of the lerman lovernment u reheats in ito lettere of 71reth 14th and arch 27th 1922 for a moratorium and considering that ermany has already been granted a hearing decidee to accord the following partifl morntorium for reparP tion payments in 1923 and 1924 for the purpose of enabling Germany to effect the financial reforms us set forth in the plan see TIT below considered uocessary to enable a resumption of full reravation nayments In later years B The aerman 3overnment is to pa in 1023 and 1 24 under the head ings Sohedule of Payments anC also Artiolo 249 of the roty out not including deliveries under Irticlee fl to 12 o the Agreement of June 28th 1919 a 500 million gold mar4o in cauh per annum as followe 200 million 150 million November 10th 150 million liaroh 10th July 10th b Deliveries in kind to the value of 750 million gold marks per annum The Commission reserves the right to inorerqie the payments in 1924 upon the recommendation of the Committee of auarantees 2 C In addition to the above lormany will be required a to moot hor ontstending obligations of 1922 as fixed by the Conmisaon s deoisione of Ilnrch 21st and August plat b to effect restitu tions under the existin3 arrangements and c to meet L11 other Tre ty obligations including expenses of the Interilliod T hinelend High Commiecion the Vilitary and Navel Control Commies one etc The Com misoion will shortly anro moe its decielon concerning cletring offioe settloJlents 7eqn sitione and collections by the Allied lovornments in occupied territory and receipts from the 13ritiall 7 eperetion 7eoovery Aot nnd similar Qty Trill be credited ageinst paymente due under the heudinl of deliverie in wind lnly requisitions and collections of mold or currency br the Oommitten of luarantoes will constitute croAte against the eresoribed cash pay lente s The outstandim differenoe botween the payments effected in 1923 and 1924 under the nartiel moratorium tnd the total duo under the Sohedule of aymente will constitute a ler man debt with C interest which must be liquidated before the end of 1930 over and above the reF ulax chedule of syments annuities fellin r due before the end of 1900 T1 The lomnisnion reserves the riht to annul at any time the mora torium offer to lermany in the event that there is any delay in effecting the prescribed payments or any failure to conform to the entir8 oatiefaction of the reparation Commiseion to the utipulatione contained in the followin1T letter to the ler Ian Chancellor II and the plan for financial reorganisation attached to it III In the event of such annulation the full obligation under the cheiflile of Pay onte and the full obligation aocruinT under Article 249 become ipso facto effective with retroactive effect and all without prejudice to tho of fereement of the unction provided by the reaty II 713 Mai rnir The draft letter fins the aparstion cessaiseloa to tha deasou b luamaallor first molts the doeielea ainaliatsed above I awl the starA4a tast tin partial saratorina will ant bo effective italeall ileinang tonally matortai os a to folfill tile oblimativo prooarilred aced b to moue the Oomemtatioes laa for flinsolat rIlOrloaizatina la additi pareet000 for faithful 7 rfoirmaa meant be Aim Jim l AZ Camay has profited by a vv zeto it ea Intbititat tv tsertnia rkaall11 11 of rotors witiohe Aug to Intelsat Oessaa fOSIOt 140 f4 is cs Errs Proof of the futility of any eellasise r pos the rust pollay he plan impasse iolias000 a losiosi inluetrials to the frOss love west of re00 ailliou ireld aorta aoapeoxgr or the stabilization of tko sort sal is Witten two a1101 ono halt billlu w31d Mai POTr011Osite lag Gomorra Idahoan int varatioa oblillitloas for 1y2 awl hued he ability of acoson loduotriels to et welt li It odvamos oaaaot W quootionel sad amid therefore be acooptoe out gasoaatoode rah adraneos will Wile the 4olok ad tir4 uallee 3t 1141111 to Salome thole balgote awl to Mot ogyeroadoe wish mei the Novas Jtat s vault eaten to otailasod soloirola C e Gaulle II will iletlIP 4 rat that portion of time dehodulo of eats whleh pa fees that this watt Ail alai ere vim ionso ofollsolo trtioa eta moaning that Caere trill to la isibetItution of anatml fur Gomm adadoloteatigo VAS mot to mem them Viii be OAF llmitatiak os tea SOPA sr seers of the irreelltiesillall or the ablictotlea tnt tea Pert of all Gams ageds to pourtir infirm tts D Mae ti want wale of owoigliking fmeilitating the anoints of the soatrole is a so mooposos of She sweat prolapses reported by the Jerries 151 1ft WO All a aeoult of tionmaerva attitude toward the flint esalltIonsi vtnieh latter 0 astitutes general default the a nolo ovo roma hors e host oertoia guaroutoos Sties tostroatoos will be rstetasd during the tire period of tag partial neratcritun as a guarantee for foltOftl porformemee by 4enneSr allied representanvoe will be rahotitutogl for Omar ropreseatatives tri the earsallad territory for the yur Ise et a oolleeting auto Suttee export taxes aye 40R1 tarots set 14 tor issuing export Detroit etteettag 8 Ievr on foretell renew tram exports eat tao rrpormont to exporters of the pap mark OtiVaiout of mica levy no not greases oaten Lug frz tilo foregoing oolleettorre vii1 be ts rliressd to the Cornitttoe of Ouaranteee S orgarioations whatsoever are to be ouppreesed here will be no dero tions to tle fore oing rube ueless speoifically authorThis euthorizat ion will be by the Committee of luiAranteee limited to exceptional cases durie the erlod of transition and only for supreme humanitarian i lotives L Taxoe will be rigorously collected without occupation olitoul pre taxes are to be auppresacd or reduced except un der the reserve that new taxes will to created 4Licl have been previously accepted ue satisfactory by the 1 ommittee of guarantees The special aosi3nment of the proceeds from taxes v 111 be euppreused F 11 surpluses from tate bu zets drawn in accordance with the principles herein ex p Teed are to be aid into the ieich budget as reparation credits G We many must so far es it is cissible to accumulate gold and forel n currencies from extra budgetary nouvelles devote these accumulations to financial reconstitution and to rei aration payment and for this purpose must levy on the capital of the eich 6 nnan Aates and German nationale oonetituto and lease monopolies for the sale F of certain products desillated by the lommission such as alcohol tobacco matohee salt 5gkrar petroleum and gasoline The xich will cede the exploitation yr railways and such other industrial services as dosigmted by the COmmiosion eich and the er man totes will lct out on shares their mines forests and salt mines 1 ases Z 41 contracts for the letting out ON tharea and concessions are to be establiehed by the ierman overnment in agreemrt with the ommisoion hese leases one contracts will provide for the payment of a lump sum by the conoee ionnaire to 0 the eloh or to the ceding ALtea when posseesion is tt ken and an annual renter both on a sold basis to be paid so far as possible in al preciated foreign eurrenaie8 very oontraot con eluded since liovember by the tich or the e an with reference to properties mentioned above ufl oh hve deprived the lieioh or the lerman etates of the free disposition of such properties or of part of the revenue therefrom are to be canoelled L nd the obligations resulting fromsuoh cancellation re to ee tret ted as in paragraph 33 above x he eich will take delivery of eeauritics equal to one v lue of all industriLl and commercial enter quarter of the ret1 2 prises flc Immovable rty in aermany or elseuhere The method of ouch a levy wil be drawn up by the 3erman Government in agree ment with tie Oommission 4uoh eourities shall provide rier to all other ri0 its or claime past or future an c Jumulative riglt to euarter of the revenue from the relevant enterprise r exploitation Yoh securities are to enjoy rights equal at lest to those enjoyed by the most erivileged securities now 10sued or to be issued in future al the securities uith all their ri6hts and privileges are to be tramferrable and mortgageable The owners of he property Cala levied upon are to receive perpetual J rents In addition to the ore oing lcvy on capital germv n in Custry will be obliged to loan to the xich three billion gold arks ao follows 1 in gold or furreLcios acoepted by the ommittes of Guarantees before the Iatee indicated 19L3 Laroh 1 July 1 i ovcmber rch 2 July 1 ovember 1 t4 1 500 million ZLO LW ti II 1 500 million sold marks By paper narks or commoroial paper oalcuaated in gold at the rate of tho day of 41yment 300 million sold marks before each of the following dates arch 1 July 1 November 1943 attreh 1 July 1944 or a total of 1 500 million aold marks German industry is to receive its reimbureement in the form of perpetual rents equal to the gold values at the eats of payment S German must bear in miad from the beginning of the partial moratorium they necessity of resorting as ft r ae aoseible to internal and external aold loans for the amortization of her capital debt L The form and conditions of the iasrpetual 1 eiCh rents to be issued for t ee foregoing pur oses are to be drawn aa by the Gorman C overnment in agreeaent with the aeparation Commissiam The internal payments of the so annuities are only payable at the end of any year when in the same year the aeich h s totally discharged all its Treaty obligations aeforred interest pay ments will carry no moratorium interest charges The aaymente of roots are to be ut the most a nominal real valae and subject to no increase as regards indemnity ahem the interest pigment 3 have be n deferred darlag the r orl od of reparation paymeate K Ooncernina the flight of capital the German Government will forthalth ive effect to the existing instructions of the Commission and the Committee of Guarantees and in the future shall institute suoh new measures as may be directed The Co mission will not refuse to consider favorably aerman roposals tending toward a arogreseive return to free movement of capital Low ever such a change of policy will not be possible until the etabilisation of the mark is aseured and the program for financial reforms tending toward u normal regime for reparation pay mente aivee results lart ertaininz to management and affeotetion of procoeds frori custone duties levy on o rortatione and extra eue stury reuources preceeda from cuetoms duties exliort taxes five percent levy on exi orte 40 eefince in i arearaplis ii of rticle 7 of the dhedule of Euxuel As ex 8 to es ezal to the Committee of uarantees and elao all payments accruing under paragraph E without prejudice to any oociplementf ry meeeurea which my be taken in virtue of paragraph o of article 7 of the zeihedule of iayments pe aeourities delivered under 1 ragraph 1 above ineludlef the revenee tkerefrom and the ilroduct from any eveetue 1 aale will be sequeetered by the Committee of auaranteee Ace sa Ae securities can be Leed either as a cover for loans or 145 nego tiable values in aocerence with errtngemnte ooncluded botueen the L erman overnment and the Jommiseion 14 proceeds from the revenue or sake of them scouritlec to be hi Leleu in the same menner ae the reeouroeu mentioned in ill ragraph auove Part i ertainin3 to enafv enent end affectation of Inemstrial Loan S 7he roceedu from the indestrial loans deecribod in para eTerh J above will be turned over to the ommittee of 4uarantues veloh latter will a elace 500 million old marks at the dispo sition of the ern verement for tine stabilization of the irk by taking 300 million end 100 million e nd 100 million gold merke fron the InCeetrial old loan on 1 oh lst July let and Remember 1st 1923 respectively b the balance of the industrial 6 old loan will be applied toward reptratiola cash eLyments prescribed by the Commission s decision 0 the proceeds from the in deetrial pt per merke or commercial paper loan are to be returned to the 3erman 3overnwnt according to ito needs for financing deliveriee in kind or reimbureement of requisition of payment effected by the Commission or aimilar means V Part pertaining to Jontrol T The control is to be exeroieed by the ommittee of ivarani toes in the name of the kimmission This Uomrnittee iB to exer cise a direot observation on eere an adainistration with aceese to all souroee of information susceptible of finanuial censequenoeS it will have power to prohibit any inopportune expense and to prescribe augmentation of receipts eor oonstitutional or legal obstacle can restrein this Jommittee in the exercise of its action over the CAennan financial structure he Reioh ane the omen etates 411 be jointly responsible to tree Uor mittee 4 he decisions of this committee will be immediately exeroieed by the 7yerman authori ties peal to the ae overnrent has the right of ap omission from the omnittee of uemnteee decis lone but such appeal will not susrend the execution of those decisione The deoision of the Oommission on such an apleal will be final Part pertainie3 to proueuure for makin effootive U The German Government mukItibrward to the kmmission on 1b ruary 15th 1 Its formal acceptance of the prodent 0 4n definitely agreeing to its loyal and complete application 2 A formal commitment 7 f lerman industry duly euaran teed to the lean of tl ree billion old mere hailer acceptances are to be transmitted simultaneously by the several German states The application of the aeove irinoipiec will immediately follow their aoceptance for all paints powers of signatories are binding hero the or stipulations requiring intervention of legislative asoembliee definite agreomert met be concluded before Parch lst here legislative essemelies will ILelude in their epprobations a d confirm by legislation 12 a full mandate to their respective governments for the execution and development of this program without the possibility of modificat ion except in agreement with the Commission Po new Legis lative intervention will be admitted except in c ses mere au thorized modifications are provided above xhibl t Jaamary xf t tea P tpepra 44 1 Gems defaults se 1 1 fled to Interested peWors by dam nieel iu oenfortIty with trtiole 17 max 11 of Torsaillos mar asestdemo yea instituted artialm 18 of the WM AiMadat ORKSISt en of the Lahr aid tho 01v are of 3turantsss for aoslasismae tlererety of exetattioa of her aoparati wa tiblir atirms For trim faltily her obilgations Ilerreay hos adopted sit attired of conorel resletsnmi ant tat airmoti7 olmearao the renal a um Asaim has lased to effect pm Wats sad dolivories to which she is baud SO FANO Delegatioa la view of p moat situation are Itmlimviaff that de sleep s ill will Bud bar lesietasoe 011ie avoiding aw aielfalorstalding proposes to the chn 4iseloa tits folloalni nedifieati ms of draft deeislua sad overly latter to the Germs Ooreranett la reply to the latter s sraratliiitsa sequost Tho Imo Delegation sweetie 8 that prase text of Voss dsousonts whisk west made be en s selerste rialto failure to attain Jes1M jut 1 Add to the first part of parsgsvph s of sewer of drift letter nefeiremes to default notifistioas dap Artialn 17 NM mastics taloa nailer arthin 18 grat add at ties Gad of the sane another phrase to tie offset ia vise 041Meas attitud the Oeurdselea aotiag ea its ova total acrd preset relOrrini7 tats riiilte of Ipoors masts as to amostroo is n or to be tales towarrie Prormaue mates th graining of a soratorivis 6 101W sal ttpoa time retortion by Iliad o as goaramtm for Aop anti pasiseats al1 tie essaritles they have soizod 1 limadlatoly pasoodias Meant too wards Niesids to mord sepia of too OvamAM of the draft 400isioll inserts Ind considering hewer r that feel lit les far Noland of flOneas a ob I igati iss under the partial utorsto14111 plait osaati 1 Illissied nor inteined unless limey ta coo formal otearspint to oonforn Is the stipalations apse 16 1 the WOMaille Ot tams itellitiss is onlialtit4t41 owl further Ali delivers es essurive twattllowet of this 41 11110m mt a to the camrally of rile droll Anaintlniperngrarh F RS follows Inerostoon ectizn4 kr altel 1onarneonts tallwring Germs eisfavalte will Amain in manure nneOr the eanditi an roallisd in the ftiorrem tali to this ilimintoseR Paris Janwex7 9th WU Vial ADDNZAZJ DISIMIAIEZ TO m AgahltallaN COMMIV ot In replyias an Jams V 194 to tbe notifioutions by the Preneh ato Dvlgian dovernflerts Tith respect to the sonotions teuided upon by these tiovernmente in Oortaaquan00 of the deelsions rAf the deeper Lion Coartission deolz ring gernany to Atiaolt in the execution of the deliveries of Wood araA coal the 4ermun Uovcrnment hes stated O Al long as the violation of the mat resulting from the violent seism of the eeonaids eentt r of Gerson end the practical Reoneecuenoes resulting therefrom con Ione aerator Will not be in a position to make deliveries to the mere responsible for that state of thinea al a meitter of fact all Hoperatios deliveries to Pre nee and Balgilla have been suispendad Anse that decluration ate irunch m Belgium Detonates believe that the Oermm declaration and its ectuall exsoutioo oonstitute a general default by Germany of Lin ohliwtions within the mei ping of par 17 Annex 11 Part VIII of the Treaty of Versailles Thor requiem the CenesAbsiont 1 to dealers that deftmlt and notify t immaatately to the worc rnments interested to to addrese to the German Oovernient the le ttur of which the droll Is sonessed hereto et netts sdurniuu IS ZRO C Nth et ini owlIm M 40WWWFOROWnoWW Wwwwww0M Itrae le la 00410ELLOR Ar ustiodtwes tee 110104 rup of the ilithase SiPtheaveriber hiparettem oaesiseion Iasi the isms Sevemsert hes prooseed to the wain these or fo Ar request for seempidea fres all ta monts 1m Jimemarietb the lieraraities OemodoOielt main the 14th se that ia het Mesta the time of repeal trot sap roLoits leamarr to the 33at Last sr the ems ears emery Lathe the garIns uoverammet notleime all oaliviries ea spasm the Mejaseties Sommiesios that it hod 6tOppsi se 11410110Stille to Frame and folciam In feet al 0 aslimeries to these Inter the Poem bye asseede and the eremitism ceemiamis iw easievet tear eM Mks theiresslar se par 19 of Alarm Il to Part VIII of the sontsestmel treaty of Versailles the SMSfel el Mat of Geramag of hor Abliatiam the mogartitias Oessisetaa believes esasseeestag WS It is not eevessment latish has aseeseavr I sessiaer the request If the less Woes sal me veil br mesa of that feet easy Item eiremmeteasse all the qtr Oft Oth 19139 of the asbeisie sees immeliateir is edema opt thsimemomels OM it preview Ay basis Sao saisvisisas at January Dear i4gie I have beer unable to write you lately because I have been laid up with a bad throat which made it difficult for rre to talk 71e have been having some wretched weather so the doctor has advised me to go South for a couple of weeks I wish I could write you fully and I am leaving to morrow about what is going on but I can not very well do it until my return My beat to all of you in Paris Yours sincerely Colonel Ja ree A Logan Jr 18 rue de Tilsitt Paris France A EXHIBIT A January kruas T HE it 001311L BIOlii THE GT 11 14i In lettere dated holeaber 14th and addressed to the le aation 00 a dasion by the Lriegalaeterkommission the German etc worriment asked to be released from all pz ymeata in aso n and for the larger part of deliveries in kinck for a p Ind of three of 1 cur years Un J weary the Iteparation C0113418 5i021 inferred the Kriegalasterkornianion that it sculd postpone tho pi yLatAut use on January 15th wail Jamary oist On the sine day January 1 Oth the uierman ver nab at notii ied the reparation earilealen brat it 14a stoz ping all reparation deliveries to these ewers deliveriea to t ranoe and neigium have in fuel ceases ual 1st der the terms Oi p art graph ti 17 of xtri ex II to l ert VIII of the Treaty 02 Versi illes the reparation t in to e Go ma a ion has today deal ared GerEnny s general de pen on Janos of hee reparation obligations towards Arance anu The asp trat 10 i GOLlai V ki ion t hauri fe le wielders treat it is unnecessary to slept any decision regarding the rsurgat made by the red this re ties t bei I ts ch German Go vert mont null and vad moo of t ii provisiona of the Ia these cone i tiosr s the c ono ciao 6 of Payttents of 11 ned Laois ii OU Leon iLL G w 11 Fahibit January If arils LETTER FROM FRISCH 30V2RINUT TO MR VOS HOESCH CdARGE D APPAIRES FOR OERUARY AT PARIS A eimiler letter was sent by the 3017ien Goverm3ent to the Gernan Charge d Affaires at Bruesele ly a letter of the 17th January the IA lister of Yoreign Afffirs had the honour to recall to the German Charge d Affaires tnat the measures taken by the french and 3olgian Governments with the cooperation of the Italian Government to induce Germany to deliver the coal which she owee to Yranoo have in no way the charcter of a These measures as the German Government has military operation been informed by a notifiootion of the 10th Jolluary have been taen on account of the default estrblished by the Reparation Co raission and comaitted by Germany in the execution of programmes of tho Reparation Commission ooncerning the deliveries of wood and coal to Prance nut as it wa indicrte in ttle letter of 17th January the attitude adopted by the Industrials of the Puhr upon the instructions from the Government of the Reich has made it impoecible for the Allied authorities to proceed in a friendly spirit and has obliged them to requisition the coal which should be delivered and to effect changes in routings in proportion as such action has been indispenocble The German lovernment in Pot commenced by deolarin to the pro nriotors of the miners that the coal delivered by them for the account of rpart tions would not be paid for by the Government The Chief of the Mission of lingineers having nrAe it known that the Allied Governments were disposed to pay directly for this coal the German lovernment forbade the proprietors to effect these deliveries even if all oasts were paid rom that time the obstruction of the German Government has not ceased to increase The ReparLtion Comaission established the loth January the defaults concerning coal and livestock respectively alder the healin restitution of reparations as well as under the heading of It made known to the German Government 26th January towards ranee the general default of Germany from her ooligtitions and townrds 3e1gium the German Government by the instruotions which it has it given by the exoitetions which has not ceased to foment among the functionaries of the railroadu and the postal tolojraph and telephone agents not only in the Fuhr but Illeo on the left bank of the Rhine risks the bringing tbout of a disorganisition of the exploitation of the mines and factories of the Ruhr Under these conditions taking into consideration the general dof ult estflaiehed by the Neparation Commission the ronch Govern ment noting in virtue of Paregraph 18 of Annex II Prt VIII of the Peroo 7reaty informs the German Government that from ebruary let no shipment of coal will tf ke place from the occupied zone toward the remainder of Germany case of necessity The whole under roservs of new sanotions in